Interim Report at September 30, 2019 - Maire Tecnimont · Current tax assets 129,976 94,901 Financial instruments - Derivatives 20,673 7,071 Other current financial assets 7,108 6,351

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Interim Report at September 30, 2019

Maire Tecnimont Group

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Contents

1. Financial Statements 3

Consolidated Income Statement 3

Consolidated Statement of Financial Position 4

Statement of changes in Consolidated Shareholders’ Equity 6

Consolidated Statement of Cash Flow (indirect method) 7

2. Group operating performance 8

3. Performance by Business Unit 10

4. Backlog by Business Unit and Region 14

5. Group balance sheet and financial position 18

6. Human Resources 23

7. Subsequent events and outlook 24

8. Statement of the Executive Officer for Financial Reporting in accordance with Article 154-bis, paragraph 2 of the CFA 25

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1. Financial Statements

Consolidated Income Statement

(Euro thousands)

9M 2019 9M 2018 CGE. %

Revenues 2,386,794 2,716,660

Other operating revenues 33,503 16,290

Total Revenues 2,420,297 2,732,949 -11.4%

Raw materials and consumables (621,355) (751,729)

Service costs (1,208,908) (1,444,884)

Personnel expense (342,923) (304,534)

Other operating expenses (78,366) (82,210)

Total Costs (2,251,552) (2,583,356) -12.8%

EBITDA 168,745 149,594 12.8%

Amortization, depreciation and write-downs (33,255) (6,342)

Write-down of current assets (1,796) 0

Provisions for risks and charges (0) (162)

EBIT 133,694 143,091 -6.6%

Financial income 13,174 14,048

Financial charges (28,232) (26,042)

Investment income 1,190 1,126

Income before tax 119,826 132,221 -9.4%

Income taxes, current and deferred (37,349) (42,591)

Net income for the period 82,477 89,630 -8.0%

Group 80,542 83,665 -3.7%

Minorities 1,934 5,966

Basic earnings per share 0.245 0.255

Diluted earnings per share 0.245 0.255


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Consolidated Statement of Financial Position

(Euro thousands)

September 30, 2019

December 31, 2018

Assets

Non-current assets

Property, plant and equipment 42,731 33,700

Goodwill 296,130 291,754

Other intangible assets 65,794 64,232

Rights-of-use - Leasing 150,815 0

Investments in associates 16,541 20,449

Financial instruments - Derivatives 7,294 1,084

Other non-current financial assets 42,464 27,792

Other non-current assets 121,283 85,432

Deferred tax assets 38,179 44,801

Total non-current assets 781,231 569,243

Current assets

Inventories 9,732 6,968

Advance to suppliers 528,053 338,146

Contractual Assets 1,883,574 1,515,979

Trade receivables 474,425 425,768

Current tax assets 129,976 94,901


Other current financial assets 7,108 6,351

Other current assets 89,674 135,548

Cash and cash equivalents 467,828 650,008

Total current assets 3,611,042 3,180,740

Non-current assets classified as held-for-sale 89,286 0

Elimination of assets to and from assets/liabilities held-for-sale (13,263) 0

Total Assets 4,468,296 3,749,983

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(Euro thousands)

September 30, 2019

December 31, 2018

Shareholders’ Equity

Share capital 19,921 19,921

Share premium reserve 272,921 272,921

Other reserves 6,331 2,808

Valuation reserve (293) (15,553)

Total shareholders’ equity & reserves 298,879 280,097

Retained earnings/(accumulated losses) (9,695) (81,060)

Net income for the period 80,542 110,575

Total Group Shareholder’ Equity 369,727 309,612

Minorities 43,657 33,021

Total Shareholders’ Equity 413,383 342,633

Non-current liabilities

Financial debt - non-current portion 195,994 206,410

Provisions for charges - beyond 12 months 19,271 16,436

Deferred tax liabilities 26,303 21,623

Post-employment & other employee benefits 11,695 11,005

Other non-current liabilities 135,344 135,490

Financial instruments - Derivatives 846 6,139

Other non-current financial liabilities 218,019 202,634

Non-current financial liabilities - Leasing 129,228 0

Total non-current liabilities 736,699 599,736

Current liabilities

Short-term debt 255,622 195,911

Current financial liabilities - Leasing 22,190 0

Provisions for risks and charges - within 12 months 16,203 40,707

Tax payables 37,764 26,998


Other current financial liabilities 330 330

Client advance payments 667,752 637,837

Contractual Liabilities 348,130 335,598

Trade payables 1,818,562 1,478,301

Other Current Liabilities 78,317 66,439

Total current liabilities 3,257,787 2,807,614

Liabilities directly associated with non-current assets classified as held-for-sale

73,690 0

Elimination of liabilities to and from assets/liabilities held-for-sale (13,263) 0

Total Shareholders’ Equity and Liabilities 4,468,296 3,749,983


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Statement of changes in Consolidated Shareholders’ Equity

(Euro thousands)

Share capital

Share premium reserve

Other reserves

Translation reserve

Valuation reserve

Retained earnings/accum.

losses

Income/(losses) for the period

Group Shareholders’

equity

Minority interest capital

& reserves

Group & Minority

int. consol. share. equity

December 31, 2018 19,921 272,921 30,694 (27,887) (15,553) (81,060) 110,575 309,611 33,021 342,633

Allocation of the result

110,575

(110,575) - -

Change to consolidation scope

- -

Dividends distribution

(39,108) (39,108)

(39,108)

Share capital increase non-cont. int.

-

-

- 7,821

7,821

Other movements

(103) (103) 880

777

IFRS 2 (Employee share plans)

(1,218) (1,218)

(1,218)

Utilization Treasury Shares 2019 for PAD 3' cycle

3,163 3,163

3,163

Acquisition of Treasury Shares 2019

(3,163) (3,163)

(3,163)

Comprehensive income

4,742

15,260

80,542

100,544 1,934

102,478

Balance at September 30, 2019

19,921 272,921 29,476 (23,145) (293) (9,695) 80,542 369,727 43,657 413,383

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Consolidated Statement of Cash Flow (indirect method)

Cash and cash equivalents at the beginning of the year (A) 650,008 630,868

Operations

Net Income of Group and Minorities 82,477 89,630

Adjustments:

- Amortisation of intangible assets 11,592 3,991

- Depreciation of non-current tangible assets 3,400 2,350

- Depreciation of Right-of-use - Leasing 18,264 -

- Provisions 1,796 162

- (Revaluations)/Write-downs on investments (1,190) (1,126)

- Financial Charges 28,232 11,996

- Financial (Income) (13,174) -

- Income and deferred tax 37,349 42,591

- Capital (Gains)/Losses 46 220

- (Increase)/Decrease inventories/supplier advances (195,604) (130,886)

- (Increase)/Decrease in trade receivables (49,244) 101,021

- (Increase)/Decrease in contract assets receivables (375,492) (294,394)

- Increase/(Decrease) in other liabilities 18,385 36,563

- (Increase)/Decrease in other assets (71,347) 15,806

- Increase/(Decrease) in trade payables/advances from clients 363,795 192,312

- Increase/(Decrease) in payables for contract liabilities 12,532 (107,389)

- Increase/(Decrease) in provisions (including post-employment benefits) (19,128) 2,569

- Income taxes paid (32,666) (32,643)

Cash flow from operations (B) (179,977) (67,228)

Investments

(Investment)/Disposal of non-current tangible assets (3,959) (1,802)

(Investment)/Disposal of intangible assets (7,236) (7,295)

(Investment)/Disposal in associated companies 2,222 (1,005)

(Increase)/Decrease in other investments (546) 0

(Investments)/Disposal of companies net of cash and cash equivalents acquired (14,296) -

Cash flow from investments (C) (23,814) (10,102)

Financing

Repayments of principal of financial Leasing liabilities (17,089) -

Payments of financial charges on financial Leasing liabilities (4,554)

Increase/(Decrease) in short-term debt 57,831 31,061

Repayments of long-term debt (7,073) (64,201)

Proceeds from long-term debt 40,960 -

Increase in securities/bonds (211) 162,674

Change in other financial assets and liabilities (3,854) 7,353

Dividends (39,108) (42,064)

Treasury Shares-Buyback (3,163) (27,706)

Cash flow from financing (D) 23,740 67,117

Increase/(Decrease) in Cash and Cash Equivalents (B+C+D) (180,053) (10,213)

Cash and cash equivalents at year end (A+B+C+D) 469,955 620,655

of which: Cash and cash equivalents of Discontinued Operations 2,127 -

CASH AND CASH EQUIVALENTS REPORTED IN THE FINANCIAL STATEMENTS 467,828 620,655

( Euro t housand) 30 September

2019

30 September

2018


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2. Group operating performance

The Maire Tecnimont Group 9M 2019 key financial highlights with application of IFRS 16 (compared to the same period of the previous year) are reported below:

(in Euro thousands) 9M

2019 % 9M 2018 % Change

Performance indicators:

Revenues 2,420,297 2,732,949 (312,652) (11.4%)

Business Profit (*) 230,041 9.5% 205,164 7.5% 24,877 12.1%

EBITDA (**) 168,745 7.0% 149,594 5.5% 19,151 12.8%

EBIT 133,694 5.5% 143,091 5.2% (9,397) (6.6%)

Net financial expense (13,868) (0.6%) (10,868) (0.4%) (3,000) 27.6%

Income before tax 119,826 5.0% 132,221 4.8% (12,395) (9.4%)

Income taxes (37,349) (1.5%) (42,591) (1.6%) (5,242) (12.3%)

Tax rate (31.2%) (32.2%) N/A

Net income 82,477 3.4% 89,630 3.3% (7,153) (8.0%)

Group net income 80,542 3.3% 83,665 3.1% (3,123) (3.7%)

(1) “Business Profit” is the industrial margin before the allocation of general and administrative costs and research and development expenses; its percentage of revenues is the Business Margin.

(**) EBITDA is net income for the year before taxes (current and deferred), net financial expenses, currency exchange differences, gains and losses on the valuation of holdings, amortization and depreciation and provisions. EBITDA is a measure utilized by management to monitor and assess the operating performance. Management consider EBITDA a key parameter in measuring the Group’s performance as not impacted by the effects of differing criteria applied to taxable income, the amount and characteristics of the capital utilized and by amortization and depreciation. As EBITDA is not governed by the Group’s accounting standards, the

Group calculation criteria may not be uniform with those adopted by other groups and, therefore, may not be comparable.

The 9M 2019 pro-forma key financial highlights without application of IFRS 16 (compared to 9M 2018) are

reported below:

(in Euro thousands) 9M 2019 (*)

% 9M 2018 % Change

Revenues 2,420,297 2,732,949 (312,652) (11.4%)

Business Profit (1) 209,645 8.7% 205,164 7.5% 4,481 2.2%

EBITDA (1) 147,103 6.1% 149,594 5.5% (2,491) (1.7%)

EBIT (2) 130,314 5.4% 143,091 5.2% (12,777) (8.9%)

Net financial expense (3) (9,314) (0.4%) (10,868) (0.4%) 1,554 14.3%

Income before tax 121,001 5.0% 132,221 4.8% (11,220) (8.5%)

Income taxes (37,499) (1.5%) (42,591) (1.6%) (5,092) (12.0%)

Tax rate (31.0%) (32.2%) N/A

Net income for the period (4) 83,501 3.5% 89,630 3.3% (6,129) (6.8%)

Group net income 81,567 3.4% 83,665 3.1% (2,098) (2.5%)

* To help the comparison with 9M 2018, 9M 2019 numbers have been restated excluding the application of the IFRS 16 accounting principles and have been modified as follows:

(1) Recognition of leasing charges of Euro 20.4 million at the level of Business Profit and of Euro 21.6 million at the level of EBITDA;

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(2) Reversal of amortization and depreciation of Euro 18.3 million with positive effect at EBIT level; (3) Reversal of financial charges on finance lease liabilities of Euro 4.6 million; (4) Net positive effect, after taxes, of adjustments (1), (2) and (3) above for Euro 1 million.

The Maire Tecnimont Group in 9M 2019 reported production volumes of Euro 2,420.3 million, reducing 11.4% on 9M 2018 (Euro 2,732.9 million).

Volumes reflect the non-linear progress of projects in the backlog, depending on the planned schedules for each project. In particular, Q3 volumes reflect the final stages of the main EPCs awarded over the past years, not yet compensated by new acquisitions that are still in their initial phases, and the temporary phasing of some EPC projects. Volumes also reflect the type of contracts that were recently acquired, mainly Engineering, Procurement, Construction Management and Commissioning, that generate lower volumes. Revenues in the last quarter of 2019 are expected to increase in line with the projects’ planned schedules.

The Group reports a Business Profit of Euro 209.6 million for 9M 2019, increasing 2.2% on Euro 205.2 million for 9M 2018. The 9M 2019 Restated Consolidated Business Margin was 8.7%, significantly improving on 9M 2018 (7.5%), as a result of the temporary change in the backlog mix for the first nine months, and particularly in the third quarter of 2019, featuring a greater proportion of Engineering, Procurement, Construction Management and Commissioning service contracts at traditionally higher margins.

G&A costs excluding the effects of IFRS 16 were Euro 57.8 million, equal to 2.4% of consolidated revenues – slightly more than in the first nine months of 2018, but essentially in line with H1 2019.

The Group, taking account also of R&D costs of approx. Euro 4.4 million, reports EBITDA of Euro 30 million for 9M 2019, significantly increasing on 9M 2018 (5.5%), as a result of - as previously indicated - the differing production mix. Restated EBITDA was Euro 147.1 million, decreasing 1.7% over the same period of the previous year (Euro 149.6 million), essentially due to the lower volumes reported in the first nine months of 2019.

Restated amortization, depreciation, write-downs and provisions amounted to Euro 16.8 million, increasing on the same period of the previous year (Euro 6.5 million), mainly following the initiation of amortization and depreciation on new Group operating assets (software and other applications), depreciation of plant and machinery following the acquisition by the subsidiary Nextchem S.r.l. in 2019 of MyReplast Industries S.r.l. (the company that manages an advanced mechanical plastics recycling facility located in Bedizzole, in the province of Brescia), the amortization of the Contractual Costs account and accruals to provisions for receivables due to risks relating to previous infrastructure initiatives.

On the basis of that outlined above, restated EBIT for 9M 2019 was Euro 130.3 million, reducing 8.9% over the same period of the previous year (Euro 143.1 million), with the margin increasing (5.4% in 9M 2019, compared to 5.2% in the previous year).

Restated net financial expenses amounted to Euro 9.3 million, improving on Euro 10.9 million in 2018. The 9M 2019 figure principally stems from the contribution from the net valuation of a number of derivative instruments for Euro 1.1 million, which had negatively impacted the same period of the previous year for Euro 1.9 million.

Restated pre-tax income totaled Euro 121 million (contracting 8.5%), against estimated taxes of Euro 37.5 million.

The effective tax rate was approx. 31%, down compared to 32.2% and to the average normalized tax rate of the last few quarters, taking into account the various jurisdictions where Group operations have been carried out.

The 9M 2019 restated net income was Euro 83.5 million, compared to Euro 89.6 million in 2018, reducing 6.8%.

Restated group net income amounted to Euro 81.6 million, decreasing 2.5% on the previous year (Euro 83.7 million).


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In the first nine months of 2019, the Maire Tecnimont Group won new projects and existing contract extensions worth approx. Euro 1,589.6 million. The Backlog at September 30, 2019 was Euro 6,062.9 million, reducing by approx. Euro 549.1 million on December 31, 2018.

The September 30, 2019 figures do not include the agreement for approx. Euro 1 billion for the urea and ammonia plant in Russia for EuroChem. The contract shall be included in the portfolio on satisfaction of a number of preliminary conditions, essentially related to the preliminary works currently in progress.

3. Performance by Business Unit

INTRODUCTION

Maire Tecnimont S.p.A. heads an integrated industrial group providing engineering services and works in the following sectors on the domestic and international markets: Hydrocarbons and Green Energy.

The BU figures are in line with the new internal reporting structure utilized by company Top Management and in particular with the reporting used by the highest decision-making level for the taking of business decisions, identified as the chief executive officer (CODM). The features of these sectors are outlined below:

I. ‘Hydrocarbons’ Business Unit - designs and constructs plant, principally for the “natural gas chain” (involving separation, treatment, liquefaction, transport, storage, regasification and compression and pumping stations); designs and constructs chemical and petrochemical industry plant for the production, in particular, of polyethylene and polypropylene (polyolefin), ethylene oxide, ethylene glycol, purified terephthalic acid ("PTA"), ammonia, urea and fertilizers; issues, in addition, within the fertilizer sector, licenses on patented technology and proprietary know-how to current and potential urea producers. Other major activities related to the sulphur recovery process, hydrogen production and high temperature furnaces. It is also engaged in the design and construction of hydro-carbon electric power plant and waste-to-energy and district heating plant.

II. “Green Energy” Business unit, involved in Green Acceleration initiatives managed by NextChem

and its subsidiaries, focused on the circular economy, undertaking mechanical plastics recycling

and the promotion of recycled chemicals; together with “Greening the Brown” (offsetting

environmental impacts from the conversion of petrol and gas) and “Green- Green” (developing

additives and substitutes to oil for fuels or plastics from renewables), of which NextChem has

proprietary technologies or agreements for the exclusive use of third party technologies. It also

works on large-scale renewables sector plant (mainly solar and wind). The Group provides

maintenance and facility management services, in addition to general services for temporary

construction facilities and the design and construction of infrastructure.

The Group assesses the performance of the operating segments based on the segment operating result. Segment revenues are those directly deriving from or attributable to the Segment and from core operations and include revenues from agreements with third parties. Segment costs are charges from segment operations incurred from third parties. For Group operations, amortization, depreciation, provisions for risks, financial income and expense and income taxes are borne by the corporate entity as excluded from operating activities and are presented in the total column.

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The Maire Tecnimont Group 9M 2019 key financial highlights by Business Unit (compared to 9M 2018) are reported below:

(Euro thousands)

Hydrocarbons Green Energy Total

Total % on

Revenues Total

% on Revenues

Total % on

Revenues

9M 2019 Revenues 2,326,468 93,830 2,420,297

Business Margin 222,918 9.6% 7,123 7.6% 230,041 9.5%

EBITDA 166,342 7.1% 2,403 2.6% 168,745 7.0%

9M 2018

Revenue 2,602,358 130,591 2,732,949

Business Margin 197,763 7.6% 7,401 5.7% 205,164 7.5%

EBITDA 146,486 5.6% 3,108 2.4% 149,594 5.5%

Change 9M 2019 vs 2018

Revenues (275,890) (10.6%) (36,761) (28.1%) (312,652) (11.4%)

Business Margin 25,156 12.7% (278) (3.8%) 24,877 12.1%

EBITDA 19,856 13.6% (705) (22.7%) 19,151 12.8%

The 9M 2019 pro-forma key financial highlights by Business Unit without application of IFRS 16 (compared

to 9M 2018) are reported below:

(in Euro millions)

9M 2019 (*) % Revenue 9M 2018 % Revenue

Technology, Engineering & Construction

Revenues 2,326.5 2,602.4

Business Profit 203.2 8.7% 197.8 7.6%

EBITDA 145.4 6.2% 146.5 5.6%

Green Energy

Revenues 93.8 130.6

Business Profit 6.4 6.8% 7.4 5.7%

EBITDA 1.7 1.8% 3.1 2.4%

(*) For comparison with 9M 2018, the 9M 2019 data was restated, without applying IFRS 16 and making the following adjustments: a negative effect of Euro 19.7 million on Business Profit and of Euro 20.9 million on EBITDA for the Hydrocarbons BU and a negative effect of Euro 0.7 million on Business Profit and EBITDA for the Green Energy BU.

HYDROCARBONS BUSINESS UNIT

9M 2019 revenues amounted to Euro 2,326.5 million (Euro 2,602.4 million in 9M 2018), decreasing 10.6% on the previous year. Volumes reflect the non-linear progress of projects in the backlog, depending on the planned schedules for each project. In particular, Q3 volumes reflect the final stages of the main EPCs awarded over the past years, not yet compensated by new acquisitions that are still in their initial phases, and the temporary phasing of some EPC projects. Volumes also reflect the type of contracts that


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were recently acquired, mainly Engineering, Procurement, Construction Management and Commissioning, that generate lower volumes. Revenues in the last quarter of 2019 are expected to increase in line with the projects’ planned schedules.

The 9M 2019 Restated Business Profit increased to Euro 203.2 million (Euro 197.8 million for 9M 2018). The 9M 2019 Restated Consolidated Business Margin was 8.7%, significantly improving on 9M 2018 (7.6%), as a result of the temporary change in the backlog mix for the first nine months, and particularly in the third quarter of 2019, featuring a greater proportion of Engineering, Procurement, Construction Management and Commissioning service contracts at traditionally higher margins.

The “Hydrocarbons” Business Unit reports an EBITDA margin of 6.2% for 9M 2019, significantly improving on 9M 2018 (5.6%), as a result of - as previously indicated - the differing production mix. Restated EBITDA was Euro 145.4 million, slightly decreasing over the same period of the previous year (Euro 146.5 million), essentially due to the lower volumes reported in the first nine months of 2019.

GREEN ENERGY BUSINESS UNIT

9M 2019 revenues of Euro 93.8 million decreased 28.1% on the previous year (9M 2018 revenues of Euro 130.6 million), due to the end of a few contracts for large-scale plants in the renewable energy sector, not yet replaced by new acquisitions, and due to the final phase of a project in the hospital sector. At the same time, our subsidiary NextChem, active in the Circular Economy, started its operations after its first investment in the advanced mechanical plastic recycling plant.

The restated 9M 2019 Business Profit was Euro 6.4 million (Euro 7.4 million in 9M 2018), decreasing as a result of the lower volumes reported, although with the margin increasing, thanks also to the Nextchem contribution. In fact, the restated Business margin for 9M 2019 was 6.8%, increasing on 5.7% in 9M 2018, thanks to the greater contribution from Nextchem, starting up only in the current period.

9M 2019 Restated EBITDA was Euro 1.7 million after the absorption of G&A costs, which reduced on the same period of the previous year, essentially due to the reduced volumes in the period.

The following tables outline Revenues, Business Profit and EBITDA by Business Unit, with application of IFRS 16 compared to the amounts for the same period of the previous year:

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223

7

198

7

0

50

100

150

200

250

Hydrocarbons Green Energy

Business Profit per business unit (Mil.€)

2019 2018


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VALUE OF PRODUCTION BY REGION:

The regional breakdown of Revenues in 9M 2019 compared to the previous year is illustrated

below:

(Euro thousands)

9M 2019 9M 2018 Change

Total % Total % Total %

Italy 51,905 2.1% 292,668 10.7% (240,763) (82.3%)

Overseas

· Europe (EU) 98,704 4.1% 110,846 4.1% (12,143) (11.0%)

· Europe (non-EU) 1,219,271 50.4% 583,236 21.3% 636,035 109.1%

· Middle East 376,008 15.5% 1,065,585 39.0% (689,578) (64.7%)

· The Americas 82,530 3.4% 115,486 4.2% (32,956) (28.5%)

· Africa 106,624 4.4% 135,337 5.0% (28,713) (21.2%)

· Asia 485,256 20.0% 429,790 15.7% 55,466 12.9%

Total Consolidated Revenues 2,420,297 2,732,948 (312,650) (11.4%)

The main regional revenue sources were Europe – non-EU (50.4%), which reflects the development of operations in Russia. As apparent in the revenues table, a reduction was reported in the Middle East and in Italy following the completion of the main projects in the region.

4. Backlog by Business Unit and Region

The following tables outline the Group’s Backlog, broken down by Business Unit at September 30, 2019, net of third-party shares and compared to the previous year:

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BACKLOG BY BUSINESS UNIT

(Euro thousands)

Hydrocarbons Green Energy Total

Initial Order Backlog at 01/01/2019 (*) 6,364,836 247,132 6,611,968

Adjustments/Eliminations (**) 173,906 103,522 277,429

2019 Order Intake 1,473,389 116,260 1,589,649

Revenues net of third parties (**) 2,326,444 89,690 2,416,134

Backlog at 30/09/2019 5,685,687 377,224 6,062,911

(*) Initial Backlog following the introduction of the new Business Units from January 1, 2019, with reallocation of Euro 4.6 million from Hydrocarbons to Green Energy, mainly in relation to the Backlog of Nextchem S.r.l..

(*) Backlog revenues are net of third-party shares of Euro 4.2 million.

(***) 2019 Adjustment/Eliminations principally reflect portfolio currency adjustments and other minor adjustments.

Backlog at 31.12.2018

(Euro thousands)



Change September 2019 vs September

2018

Change September 2019 vs December

2018

6,364,836 Hydrocarbons 5,685,687 7,050,847 (1,365,161) (19.4%) (679,149) (10.7%)

247,132 Green Energy 377,224 278,974 98,250 35.2% 130,092 52.6%

6,611,968 Total 6,062,911 7,329,822 (1,266,911) (17.3%) (549,057) (8.3%)

(*) Initial Backlog following the introduction of the new Business Units from January 1, 2019, with reallocation of Euro 4.6 million from Hydrocarbons to Green Energy, mainly in relation to the Backlog of Nextchem S.r.l..


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In the first nine months of 2019, the Maire Tecnimont Group won new projects and existing contract extensions worth approx. Euro 1,589.6 million. The Backlog at September 30, 2019 was Euro 6,062.9 million, reducing by approx. Euro 549.1 million on December 31, 2018.

The September 30, 2019 figures do not include the agreement for approx. Euro 1 billion for the urea and ammonia plant in Russia for EuroChem. The contract shall be included in the portfolio on satisfaction of a number of preliminary conditions, essentially related to the preliminary works currently in progress.

BACKLOG BY REGION

The Group Backlog broken down by region at September 30, 2019 and compared with the previous year is presented below:

(*) Backlog revenues are net of third-party shares of Euro 4.2 million.

(**) 2019 Adjustment/Eliminations principally reflect portfolio currency adjustments and other minor adjustments.

Europe (EU)Europe

(non-EU)Middle East

The

AmericasAfrica Asia Other

Initial Order Backlog at

01/01/2019141,973 107,326 3,543,392 692,379 159,147 758,106 1,209,645 0 6,611,968

Adjustments/Eliminations (**) 103,743 40,441 34,294 94,497 (118,014) 3,845 118,538 83 277,429

2019 Order Intake 120,543 230,020 311,893 159,733 416,294 330,685 20,481 1,589,649

Revenues net of third parties 47,765 98,704 1,219,247 376,008 82,530 106,624 485,256 2,416,134

Backlog at 30/09/2019 318,494 279,084 2,670,332 570,602 374,897 986,013 863,408 83 6,062,911

Overseas( Euro t housands)

Italy Total


(Euro thousands)



Change September 2019 vs September 2018

141,973 Italy 318,494 170,254 148,240 87.1%

107,326 Europe (EU) 279,084 121,663 157,421 129.4%

3,543,392 Europe (non-EU) 2,670,332 4,048,979 (1,378,647) (34.0%)

692,379 Middle East 570,602 875,103 (304,502) (34.8%)

159,147 The Americas 374,897 57,889 317,008 547.6%

758,106 Africa 986,013 784,353 201,660 25.7%

1,209,645 Asia 863,408 1,271,581 (408,173) (32.1%)

0 Others 83 0 83 100.0%

6,611,968 Total 6,062,911 7,329,822 (1,266,911) (17.3%)

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ORDER INTAKE BY BUSINESS UNIT AND REGION

The table below outlines 9M 2019 Group Order Intake broken down by Business Unit and Region and compared with the previous year:

(Euro thousands)

9M 2019 9M 2018 Change 2019 vs 2018

% of total % of total

Order Intake by Business Unit

Hydrocarbons 1,473,389 92.7% 2,640,673 97.7% (1,167,285) (44.2%)

Green Energy 116,260 7.3% 61,906 2.3% 54,354 87.8%

Total 1,589,649 100% 2,702,579 100% (1,112,931) (41.2%)

Order Intake by Region:

Italy 120,543 7.6% 130,916 4.8% (10,374) (7.9%)

Europe (EU) 230,020 14.5% 102,153 3.8% 127,867 125.2%

Europe (non-EU) 311,893 19.6% 508,312 18.8% (196,419) (38.6%)

Middle East 159,733 10.0% 447,334 16.6% (287,601) (64.3%)

The Americas 416,294 26.2% 86,011 3.2% 330,282 384.0%

Africa 330,685 20.8% 299,953 11.1% 30,732 10.2%

Asia 20,481 1.3% 1,127,899 41.7% (1,107,419) (98.2%)

Total 1,589,649 100% 2,702,579 100% (1,112,931) (41.2%)


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5. Group balance sheet and financial position

The Maire Tecnimont Group key balance sheet highlights at September 30, 2019 and December 31, 2018 were as follows:

Maire Tecnimont Condensed Consolidated Statement of financial position September 30, 2019 December 31, 2018 Change (Euro thousands)

Non-current assets 781,231 569,243 211,987

Inventories/Advances to Suppliers 537,785 345,113 192,672

Contractual Assets 1,883,574 1,515,979 367,595

Trade receivables 474,425 425,768 48,658

Cash and cash equivalents 467,828 650,008 (182,180)

Other current assets 247,430 243,872 3,558

Current assets 3,611,042 3,180,740 430,303

Assets held for sale, net of eliminations 76,023 0 76,023

Total assets 4,468,296 3,749,983 718,313

Group shareholders’ equity 369,727 309,612 60,115

Minorities Shareholders' Equity 43,657 33,021 10,635

Financial debt - non-current portion 195,994 206,410 (10,416)

Other non-current financial liabilities 218,019 202,634 15,385

Non-current financial liabilities - Leasing 129,228 0 129,228

Other non-current liabilities 193,459 190,692 2,767

Non-current liabilities 736,699 599,736 136,963

Short-term debt 255,622 195,911 59,711

Current financial liabilities - Leasing 22,190 0 22,190

Other financial liabilities 330 330 0

Client advance payments 667,752 637,837 29,915

Contractual Liabilities 348,130 335,598 12,532

Trade payables 1,818,562 1,478,301 340,261

Other current liabilities 145,201 159,637 (14,436)

Current liabilities 3,257,787 2,807,614 450,173

Liabilities held for sale, net of eliminations 60,427 0 60,427

Total Shareholders’ Equity and Liabilities 4,468,296 3,749,983 718,313

“Non-current assets” increased on the end of the previous year, mainly due to the recognition for Euro 150,815 thousand of the “Rights-of-use” account arising following the application of the new standard IFRS 16; the additional increases relate to the assets of MyReplast Industries S.r.l, a NextChem subsidiary acquired on February 20, which manages an advanced mechanical plastics recycling plant located in Bedizzole (provide of Brescia). The total value of the operation is approx. Euro 12.5 million.

“Current assets” also increased on December 2018 by Euro 430,303 thousand, with the main changes concerning the working capital movements on the main orders, as per the contractual terms, whose details are indicated below:

- Inventories/Advances to Suppliers, amounting to Euro 537,785 thousand, principally refer to the advances paid to foreign and Italian suppliers and sub-contractors against materials being produced and shipped for the construction of plant and work in progress. The increase in the payments on account to suppliers and subcontractors is a direct consequence of the advancement of the projects acquired in previous years and for which significant numbers of principal equipment orders were made, resulting in advance payments to suppliers and subcontractors, primarily in respect of the Amursky Gas Treatment Plant (AGPP). The account also includes finished products and goods relating to the inventory of the subsidiary Met T&S, which supplies

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chemical products, replacement parts and polymers, and the inventory of finished goods of MyReplast Industries, a company that manages an advanced mechanical plastics recycling plant located in Bedizzole, in the province of Brescia, acquired in February 2019 from the Nextchem Group;

- “Contract Assets” are the net positive amount, by individual order, resulting from the difference between progressive production or the amount of works-in-progress recorded according to the percentage of completion net of losses realized or estimated at the reporting date and invoicing on account relating to the advancement of works. The net increase of Euro 367,595 thousand is essentially due to the decrease in invoicing during the period against the economic progress of the projects, which are in very advanced stages and therefore present invoicing terms that do not reflect progress in a linear manner but that are essentially related to achievement of the final project milestones.

- Trade receivables at September 30, 2019 amount to Euro 474,425 thousand, an increase of Euro 48,658 thousand compared to December 31, 2018. The movement in trade receivables is due to the contractual terms of the main orders; increased invoicing is expected in subsequent months, as illustrated previously.

- The assets and liabilities held-for-sale reported a net positive value of Euro 15,597 thousand and concerned the project company MGR Verduno S.p.A. involved in the “Alba-Bra Hospital concession” initiative regarding the contract for the “construction and management” of the structure signed with ASL CN2, whose end of works certificate was issued on September 21, 2019, with management expected to begin by December 1, 2019. With regards to the disposal of this company, on September 30, 2019 such was considered “highly probable” on the basis of the advanced status of negotiations with the interested counterparty, following the receipt of the binding offer for the company’s acquisition and with closing expected by year-end. The net assets regarding the project company MGR Verduno S.p.A. were valued at the lesser between the carrying amount and the fair value, net of selling costs, as per negotiations in progress, in accordance with IFRS 5. In the income statement the relative income flows are not classified separately from continuing operations as the disposal does not concern a major line of business.

- Cash and cash equivalents at September 30, 2019 amount to Euro 467,828 thousand, a decrease

of Euro 182,180 thousand compared to December 31, 2018.

The main cash flow movements are reported below:

Cash Flow Statement

September 30, 2019

September 30, 2018

Change 2019-2018

June 30,

2019 3Q (Euro thousands)

Cash and cash equivalents at beginning of the period (A) 650,008 630,868 19,140 650,008 0

Cash flow from operating activities (B) (179,977) (67,228) (112,750) (240,116) 60,139

Cash flow from investing activities (C) (23,814) (10,102) (13,712) (16,783) (7,031)

Cash flow from financing activities (D) 23,740 67,117 (43,377) 24,041 (302)

Increase/(Decrease) in cash and cash equivalents (B+C+D) (180,053) (10,213) (169,839) (232,858) 52,805

Cash and cash equivalents at end of the period (A+B+C+D) 469,955 620,655 (150,699) 417,150 52,805


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Cash Flow Statement

September 30, 2019

September 30, 2018

Change 2019-2018

June 30,

2019 3Q (Euro thousands)

of which: Cash and cash equivalents of Discontinued Operations 2,127 0 2,127 0 2,127

Cash and cash equivalents at end of period reported in financial statements

467,828 620,655 (152,826) 417,150 50,678

Operating cash flow of Euro 179,977 thousand was absorbed in the nine months, although improving by Euro 60,139 thousand in the third quarter of 2019. Cash flow movements mainly concerned the expected working capital changes in line with the normal development of projects, in particular the EPC projects substantially concluding in the period, although ahead of final invoicing related to the achievement of the final project milestones, in addition to the nature of the recently acquired contracts. Cash flows from operating activities include also income tax payments, which in the first nine months totaled Euro 32,666 thousand.

Investment activities absorbed cash totaling Euro 23,814 thousand, mainly for the acquisition of MyReplast Industries S.r.l, a NextChem subsidiary which manages an advanced mechanical plastics recycling plant, with the overall value of the transaction amounting to approx. Euro 12.1 million. A payment of approx. Euro 2.2 million was made for the acquisition of the Dutch company Protomation, specialized in Information Technology and further costs were incurred for the installation of software and other applications, license development and new technology, in addition to capex as a result of the overall growth of the Group.

Financing activities generated cash totaling Euro 23,740 thousand, mainly due to the utilization of current account overdrafts as part of the management of the working capital on a number of projects and the drawdown of a non-recourse loan of approx. Euro 8 million from Intesa Sanpaolo, through the new fund dedicated to the Circular Economy established for structured support for these type of industrial initiatives, for the acquisition of MyReplast Industries S.r.l, in addition to a working capital line to support requirements for Euro 2 million and a further drawdown concerning the Project financing from the bank syndicate comprising IMI, BPER and Intesa Sanpaolo for the project company MGR Verduno S.p.A. involved in the “Alba-Bra hospital concession” project.

These effects were partially offset by the payment of the dividend approved by the Shareholders’ Meeting of Euro 39,108 thousand and by the residual purchases of treasury shares for approx. Euro 3.2 million, in addition to interest paid in the first nine months of 2019.

The Net Financial Position is outlined in the following table:

NET FINANCIAL POSITION September 30, 2019

December 31, 2018

Change June 30, 2019 3Q (Euro thousands)

Short-term debt 255,622 195,911 59,711 250,566 5,056

Current financial liabilities - Leasing 22,190 0 22,190 22,707 (517)

Other current financial liabilities 330 330 0 330 0

Financial instruments - Current derivatives 12,917 25,493 (12,575) 17,159 (4,241)

Financial debt - non-current portion 195,994 206,410 (10,416) 239,069 (43,075)

Financial instruments - Non-current derivatives 846 6,139 (5,292) 2,962 (2,115)

Other non-current financial liabilities 218,019 202,634 15,385 210,567 7,452

Non-current financial liabilities - Leasing 129,228 0 129,228 134,658 (5,430)

Total debt 835,146 636,916 198,230 878,017 (42,870)

Cash and cash equivalents (467,828) (650,008) 182,180 (417,150) (50,678)

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NET FINANCIAL POSITION September 30, 2019

December 31, 2018

Change June 30, 2019 3Q (Euro thousands)

Temporary cash investments (211) (211) 0 (211) 0

Other current financial assets (6,897) (6,351) (546) (7,513) 616

Financial instruments - Current derivatives (20,673) (7,071) (13,602) (24,023) 3,349

Financial instruments - Non-current derivatives (7,294) (1,084) (6,209) (8,283) 990

Other non-current financial assets (37,427) (13,761) (23,666) (29,652) (7,774)

Total cash and cash equivalents (540,329) (678,486) 138,157 (486,832) (53,497)

Other financial liabilities of discontinued operations 51,345 0 51,345 0 51,345

Other financial assets of discontinued operations (2,127) 0 (2,127) 0 (2,127)

Net financial position 344,034 (41,570) 385,604 391,185 (47,150)

"Project Financing - Non Recourse" financial payables (61,643) (36,270) (25,373) (60,529) (1,114)

Other non-current assets - Expected repayments (17,081) (16,245) (837) (16,344) (737)

Trade Receivables - Admissible Financial Assets (38,273) 0 (38,273) (38,273) 0

Finance lease payables IFRS 16 (151,418) 0 (151,418) (157,365) 5,947

Adjusted Net Financial Position 75,619 (93,874) 169,493 118,673 (43,055)

As the Net Financial Position is not governed by the Group’s accounting standards, the Group calculation criteria may not be uniform with those adopted by other groups and, therefore, may not be comparable.

The adjusted net financial position at September 30, 2019 was a net debt of Euro 75.6 million, down from December 31, 2018, at which a net cash position of Euro 93.9 million was reported, although improving by Euro 43,055 thousand over June 30, 2019 (negative for Euro 118.7 million). Cash and cash equivalents at September 30, 2019 amount to Euro 467,828 thousand, a decrease of Euro 182,180 thousand compared to December 31, 2018.

Operating cash flow of Euro 179,977 thousand was absorbed in the nine months, although improving by Euro 60,139 thousand in the third quarter of 2019. Cash flow movements mainly concerned the expected working capital changes in line with the normal development of projects, in particular the EPC projects substantially concluding in the period, although ahead of final invoicing related to the achievement of the final project milestones, in addition to the nature of the recently acquired contracts. Cash flows from operating activities include also income tax payments, which in the first nine months totaled Euro 32,666 thousand.

Against the decrease in cash and cash equivalents as already reported, the gross debt rose following an increase in short-term debt due to the use of current account overdrafts and working capital lines to support the short-term needs of certain projects.

Long-term financial payables were mainly impacted by the drawdown of a non-recourse loan of approx. Euro 8 million issued by Intesa Sanpaolo for the acquisition of MyReplast Industries S.r.l.

The increase in the mark to market of derivative instruments was Euro 37,679 thousand, principally concerning derivative instruments hedging order revenue and cost fluctuations, including raw materials, mainly as a result of the performance of the Dollar against the Euro in the first nine months of 2019.

The “Non-Recourse” financial payables account concerns the loan by the project company MGR Verduno S.p.A., engaged in the “Alba-Bra Hospital concession” construction and management contract agreed with ASL CN2, which as previously indicated was classified to “Assets held-for-sale” and the loan for the acquisition of MyReplast Industries S.r.l.. The above financial payables are on a no-recourse basis, i.e. a type of financing dedicated to these initiatives which is not guaranteed by the Parent Company, but rather by the cash flows from the development of these initiatives of the Vehicle Companies. For these reasons, they were excluded from the calculation of the adjusted net financial position.

The “adjusted net financial position” includes both the value of the assets related to the compensation for the events in India on the basis of the opinion of the legal experts and the insurance coverage provided by leading insurers, undertaken to protect against such events, and several accounts receivable


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for completed activities relating to a facility that has already been started up and brought on stream, in relation to which the client has requested very significant modifications involving the extension of the repayment terms. It excludes financial payables under IFRS 16 Leasing of Euro 157,365 thousand, which have only been recognized in view of the application of the new accounting standard IFRS 16.

Group Shareholders' equity at September 30, 2019 amounts to Euro 369,727 thousand, a net increase of Euro 60,115 thousand compared to December 31, 2018 (Euro 309,612 thousand).

Total consolidated Shareholders’ Equity, considering minority interests, at September 30, 2019 amounts to Euro 413,383 thousand, an increase of Euro 70,750 thousand compared to December 31, 2018. This increase is also due to the change in minority interest equity including the result for the period and the change in the consolidation scope.

The overall increase in Group Shareholders’ Equity is mainly due to the net income for the period for Euro 80,542 thousand together with the positive change in the Cash Flow Hedge reserve of the derivative instruments, which mainly relates to the mark-to-market gains of the derivative instruments to hedge the currency risk of the revenues and costs from the projects, net of the relative tax effect and of the reserve for the translation of items in foreign currencies.

The main reductions in Group Shareholders’ Equity concerned the payment of the dividend approved by the Shareholders’ AGM of Euro 39,108 thousand and the decrease in the Valuation Reserve in relation to the valuation at fair value of certain financial assets.

They concern contractual advances from clients on the signing of construction contracts. Client advance payments at September 30, 2019 were Euro 667,752 thousand, increasing Euro 29,915 thousand on December 31, 2018, principally following the collection of a further portion of advance in relation to the construction phase of the Amursky Gas Treatment Plant (AGPP) that was then paid on in the period as an advance to the main subcontractor.

“Contract liabilities” are the net negative amount, by individual order, resulting from the difference between progressive production or the amount of works-in-progress recorded according to the percentage of completion net of losses realized or estimated at the reporting date and invoicing on account relating to the advancement of works.

The increase in the net value of construction contract liabilities, totaling Euro 12,532 thousand, relates to the advancement of the orders and their contractual terms, against which the value of works carried out in the year was higher than the invoicing on account.

Trade payables at September 30, 2019 amount to Euro 1,818,562 thousand, an increase of Euro 340,261 thousand compared to December 31, 2018. The account includes also accruals at period-end for invoices to be received. This change was essentially due to the general working capital performance of the main orders, which similarly to the contract with the client influences the contractual terms of the goods and services provided by supplier and subcontractors, payment of which is essentially tied to the final project milestones.

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6. Human Resources

The headcount at September 30, 2019 of the Maire Tecnimont Group was 6,492, an increase of 352 on the 6,140 at the end of 2018, resulting from the 1,273 new hires and 921 departures in the period.

The workforce at 30/09/2019 of the Maire Tecnimont Group, with movements (by qualification and region) on 31/12/2018, is outlined in the following tables. The table below outlines the workforce by areas of effective engagement at 30/09/2019 and 31/12/2018, with the relative movements.

Changes in workforce by category (31/12/2018-30/09/2019):

Category Workforce 31/12/2018

Hires Departures Reclassification

employee category (*)

Workforce 30/09/2019

Cge. Workforce 30/09/2019

vs. 31/12/2018

Executives 639 25 (25) 14 653 14

Managers 2,132 276 (202) 116 2,322 190

White-collar 3,151 863 (639) (127) 3,248 97

Blue-collar 218 109 (55) (3) 269 51

Total 6,140 1,273 (921) 0 6,492 352

Average headcount 5,846 6,331

(*) includes promotions, changes in category following inter-company transfers / Job Title reclassifications

The classification of the qualifications above does not necessarily reflect the contractual classification under Italian employment law, but corresponds to the identification criteria adopted by the Group on the basis of roles, responsibilities and duties.

Changes in workforce by region (31/12/2018-30/09/2019):

Region Workforce 31/12/2018

Hires Departures Reclassification

employee category (*)

Workforce 30/09/2019

Cge. Workforce 30/09/2019

vs. 31/12/2018

Italy & Rest of Europe 2,857 343 (246) (33) 2,921 64

India Region 1,872 268 (118) 19 2,041 169

South East Asia and Australian Region 2 5 0 (1) 6 4

Rest of Asia 190 39 (50) 14 193 3

Russia & Caspian Region 552 401 (244) (1) 708 156

Americas Region 27 9 (3) 1 34 7

Middle East Region 561 184 (237) 1 509 (52)

North Africa Region & Sub-Saharan Africa Region

79 24 (23) 0 80 1

Total 6,140 1,273 (921) 0 6,492 352

(*) includes promotions, changes in category following inter-company transfers / Job Title reclassifications

Changes in workforce by operational region (31/12/2018-30/09/2019):

Region Workforce

31/12/2018 Workforce

30/09/2019

Cge. Workforce 30/09/2019 vs.

31/12/2018

Italy & Rest of Europe 2,439 2,553 114

India Region 1,605 1,836 231

South East Asia and Australian Region 3 13 10


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Region Workforce

31/12/2018 Workforce

30/09/2019

Cge. Workforce 30/09/2019 vs.

31/12/2018

Rest of Asia 280 249 (31)

Russia & Caspian Region 794 936 142

Americas Region 102 96 (6)

Middle East Region 760 644 (116)

North Africa Region & Sub-Saharan Africa Region 157 165 8

Total 6,140 6,492 352

7. Subsequent events and outlook

The key events were as follows:

On October 18th, 2019 an agreement was reached for the disposal of the subsidiary MGR Verduno 2005 S.p.A. (“MGR”) to a primary infrastructure investment fund. MGR owns the concession to manage the Alba/Bra hospital, located in Verduno (Piedmont). Construction of the hospital ended on September 21st, 2019. This agreement is subject to the required legal disclosures and to the financing banks’ approval.

OUTLOOK

The Group continues to maintain a high backlog at the end of September 2019. Thanks to the contracts already signed with international clients since the beginning of the current year, the Group will experience an improved industrial performance in the following quarters, in line with the projects’ planned schedules. 2019 revenues are thus expected to be slightly lower than in 2018, due to the new order intake, which is still in the initial engineering phase, and due to the type of the recently acquired contracts, which mainly relate to services for Engineering, Procurement, Construction Management and Commissioning, which generate lower revenues. On the other hand, the higher percentage of these type of contracts is expected to lead to higher margins than last year, which was characterized by a higher percentage of EPCs.

The market environment is expected to continue favoring a high level of investments in the downstream sector. This is confirmed by an all-time high commercial pipeline, both in the traditional geographical areas where the Group operates, and in new areas characterized by stable economies and raw materials availability.

As for the Green Acceleration Project, Maire Tecnimont is currently active in the Circular Economy sector, through its subsidiary NextChem, thanks to the investment made this year in the most efficient and advanced plastic mechanical recycling plant in Europe. The plant is located in Italy, and has already become a reference plant with an industrial scale size to support expected important domestic and international market opportunities.

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8. Statement of the Executive Officer for Financial Reporting in accordance with Article 154-bis, paragraph 2 of the CFA

The undersigned Dario Michelangeli, as “Executive Officer for Financial Reporting” of MAIRE TECNIMONT S.p.A., declares, in accordance with Article 154-bis, paragraph 2 of the Consolidated Finance Act, that the accounting disclosure in this “Interim Report at September 30, 2019” corresponds to the underlying accounting documents, records and entries of the company.

Milan, October 24, 2019

Executive Officer

for Financial Reporting

Dario Michelangeli

Documents

Interim Report at September 30, 2019 - Maire Tecnimont · Current tax assets 129,976 94,901 Financial instruments - Derivatives 20,673 7,071 Other current financial assets 7,108 6,351