ANNUAL REPORT 2020 ANNUAL REPORT 2020 This sector’s development with the movement of wind farms into deep waters and away from the coast, together with the introduction of innovative solutions, i.e. floating wind farms, pushes towards new technological frontiers and necessitates the design of new generation vessels. The pandemic, however, did not put a whole series of long-standing initiatives on hold, particularly those related to sustainability. As part of a path aimed at achieving sustainable success, we have further integrated the Business Plan’s strategy with the Sustainability Plan, with the aim of pursuing the Sustainable Development Goals (SDGs). We have also renewed our participation in the United Nations Global Compact, the world’s largest initiative for business sustainability on a voluntary basis, inspired by ten universal principles relating to human rights, labour, the environment and the fight against corruption, through political actions, corporate practices, as well as social and civil behaviour. Fincantieri was the recipient of the MIKE award in both the national and international Global Companies sections for our future-oriented strategic approach and our vision based on the challenges of sustainability and innovation. In terms of technological development, energy efficiency and reduction of environmental impact, we have undertaken important projects, both in the naval sector and in new business segments. To cite a few, Fincantieri NexTech, Autostrade Tech and IBM have signed an agreement for the implementation of a new- generation system for monitoring motorway infrastructure and keeping it safe. In the field of cyber security, Fincantieri NexTech has been awarded a European tender to supply a programmable emulator for checking the effectiveness of countermeasures in electronic defence systems. At the shipyard Castellamare di Stabia construction continues on Zeus, the first prototype hydrogen-powered ship, developed with CNR, prestigious To our Shareholders, Italian universities, the National Research and Promotion Agency for Standardization and RINA. And in our core business, we installed new air sanitation systems on board cruise ships, in partnership with the 2020 was a very difficult year for the global economy; unexpectedly, despite every medical-scientific and virology laboratory ICGEB (International Centre for Genetic Engineering and Biotechnology) in Trieste. technological advance, the world was unable to prevent and stop the pandemic and demonstrated in its In 2021, the Company intends to return to growth and build a solid future amidst an environment that interconnectedness how fragile it is. That very feature that made ideas, goods and people flow, fuelling remains uncertain and complicated by the pandemic. growth and progress became a factor of weakness. We would like to thank all the workforces, our suppliers and the institutions for everything that has been Virtually all sectors have come to a standstill; in the case of Fincantieri, restrictions on movement and the done to overcome the difficulties and achieve a new normality, and for their future commitment and passion segregation of territories have halted tourism and the cruise industry. that will contribute to the success of this company. The spread of the COVID-19 epidemic caused the suspension of cruise activity from mid-March 2020, the immobilization of the entire fleet, the cancellation of revenues for all the companies and a damage in image due to some episodes of infection on board. It is estimated that 2020 closed with the number of passengers carried at around 7 million (volume consolidated almost exclusively in the first quarter of the year). In 2021, the start of the vaccination phase will encourage a gradual recovery, concentrated in the second half of the year and led by the more mature markets. Initially, it will involve relatively few ships, in national or similar areas in terms of destinations and nationality of passengers and with low occupancy rates, subject to Giampiero Massolo the application of strict health protocols agreed with the various local authorities. Chairman of Fincantieri However, in the light of statements made by the main players, but also the indications of the World Tourism Organization on the subject of a recovery in the sector, a normalization of the market can be expected in 2023 or, more optimistically, as early as 2022. In contrast to the civilian sector, the naval sector currently seems to have been less affected by the pandemic. Given the long development times for naval programs, those that have already been launched are unlikely to be interrupted, while new ones that have not been finalized may, at most, be delayed. On the other hand, the pandemic further delayed the recovery of the offshore oil & gas industry in the face of the collapse in oil prices triggered by the widespread drop in consumption. However, new opportunities have arisen in the field of renewable energies linked to the European Union’s ambitious decarbonization objectives. Brussels wants to increase the continent’s offshore wind capacity 25-fold: from the current 12 GW it intends to increase it to at least 60 GW by 2030, and 300 GW by 2050. The objective requires a significant amount of investment and demand for know-how and specialized naval vessels, to which Fincantieri can certainly contribute. 4 5 collaboration with our long-standing German partner TKMS, with whom we have entered into a partnership. In Europe, we are shaping the consolidation process in the naval sector through Naviris, the joint venture established with Naval Group. The company achieved an important milestone by signing a Memorandum of Understanding with Spain’s Navantia to extend industrial cooperation for the European Patrol Corvette program, as part of the Permanent Structured Cooperation (PESCO). The goal of the project, which four countries have joined so far (Italy as coordinator, France, Spain and Greece), is to involve other European partners to develop a new naval platform that could become common to all. In the Offshore and Specialized Vessels segment, the Norwegian subsidiary shifted its focus from oil & gas to the fast-growing world of renewable energies, achieving important successes for vessels that support activities in offshore wind farms and cable laying. At the same time, on the technological frontier of autonomous ships, it has finalized a contract for robotic ships on which it will be possible to reduce human presence on board to manage the ship to a minimum. With a view to broadening its expertise, the Group has established itself in the infrastructure, electronics and cyber security sectors by leveraging its project management and system integrator skills and carrying out a number of important operations such as the acquisition of INSO and SOF, active in the construction of hospitals, and Fincantieri NexTech (formerly INSIS), with capabilities ranging from cyber security to security and telecommunications systems. In parallel with the progress expected from the scientific world in terms of treatments and vaccinations, in 2021 we intend to go ahead with our plans and make up for what was lost in 2020; we therefore expect a To our Shareholders, growth of over 25%, guaranteed by the high number of orders in the order book, and a return to profit as margins improve. At the same time, we were the first to agree to vaccinate our personnel. 2020 was undoubtedly an unusual year: the pandemic affected everyone, with no exceptions. I am proud of We are determined to build the Group’s sustainability using a long-term vision, which has enabled us to Fincantieri’s strong resolve in its response, safeguarding its people, its operations and its backlog. withstand the interruptions caused by the pandemic better than others. To date, the strategy adopted has enabled us to avoid order cancellations and we enter 2021 with our total In the light of the opportunities for the country’s relaunch offered by the Recovery Plan, for the coming years backlog, comprising of 116 ships with deliveries up to 2029 and a value of euro 35.7 billion (soft backlog of we will make our experience and spirit as builders available to the Italian government. around euro 7.9 billion), intact. We are able to undertake numerous projects in the field of maritime and land infrastructures, providing Revenues of euro 5,191 million, excluding pass-through activities, decreased by 11% compared to the expertise in digital and green technologies, and we have an over-arching vision when tackling complex and previous year, mainly due to the loss of 20% of production hours compared to that scheduled for the Group’s high-value projects with engineering and organizational skills suited to managing and bringing together the Italian sites. The health emergency was tackled with the participation of everyone, ensuring the safety of country’s other leaders in excellence. resources at all its production sites and deciding to only restart activities very gradually. This year my thanks to the Fincantieri workforce and to those in the supply network, which is an integral In spite of everything, we were able to keep to the delivery program, which had been rescheduled with part of the Group, is even more heartfelt. My thanks also go to all the Group’s personnel, many of whom are customers following the loss of production due to the pandemic, delivering seven vessels, including our now based in many countries, but who we have managed to make feel part of Fincantieri all the same. It has 100th ship, the Enchanted Princess of Princess Cruises, a Carnival Group brand. The Italian and foreign not been easy work; we as a company have set up an organizational machine to protect health, but without production network delivered a further 12 vessels (naval, offshore and specialized vessels), including a the seriousness, commitment and above all the sense of responsibility of everyone the results achieved FREMM frigate and an LCS, produced by the Muggiano and US Marinette Marine yards respectively.