Technip Energies N : Transcript

Technip Energies

FY 2021 Results &

ESG Roadmap

Thursday, 3rd March 2022

Technip Energies FY 2021 Results

Thursday, 3rd March 2022

Operator's Introduction

Operator

Good day, and thank you for standing by. Welcome to the Technip Energy's Full-Year 2021 Results Conference Call. Please be advised today's conference is being recorded.

I'd now like to hand the conference over to your speaker today, Phillip Lindsay, Investor Relations. Please go ahead.

Welcome and Disclaimer

Phillip Lindsay

Vice President of Investor Relations, Technip Energies

Thank you, Sarah. Hello to everyone, and welcome to Technip Energy's Full Year 2021 Financial Results Presentation. Today on the call, our CEO, Arnaud Pieton, and our CFO, Bruno Vibert, will present our business and financial highlights as well as the outlook. We will also present our ESG road map through a short video, and this will be followed by a Q&A.

Before we start, I would urge you to take note of the disclaimer and forward-looking statements on Slide 2.

I will now pass the call over to Arnaud.

Business Highlights

Arnaud Pieton

CEO, Technip Energies

FY 2021 Key highlights

Thank you, Phil, and welcome to our full year 2021 financial results presentation. 2021 was our first year as Technip Energies, and I am extremely proud of the way that our teams have delivered despite testing external environment. This was obviously no ordinary year for any of us. Despite the extreme challenges of the COVID pandemic, Technip Energies pulled off some real accomplishments and made an extremely strong start.

Let's start with the highlights. Operationally, our execution was solid throughout, and we achieved notable progress across our portfolio. We drove double-digit revenue growth year- over-year and margins at 6.5%, well ahead of our original guidance. With a book-to-bill of 1.5, we achieved nearly EUR 10 billion of order intake, of which 94% was outside of Russia, notably reinforcing our positions in LNG and ethylene market. This led to a near 30% improvement in our backlog to EUR 16.4 billion, equivalent to 2.5x revenues and providing clear multiyear visibility.

Based on the strength of these results, we are very pleased to announce our maiden dividend at EUR 0.45 a share, which is subject to approval at our Annual Shareholder Meeting in May. The dividend reflects our commitment to shareholder distributions and our confidence in our business outlook. Finally, in line with our plans and our promises, today, we have published our ESG roadmap and scorecard following an extensive exercise throughout last year. I will

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return to ESG later in my presentation.

Russia / Ukraine conflict: context for T.EN

Before continuing with the results presentation, let me say a few words regarding the situation in Russia and Ukraine, and put our exposure into context. The company is closely monitoring the situation. The safety of our people and the families is, as always, our first priority. We are providing today a financial framework that provides transparency around contribution from Russia.

As of year-end, 23% of our backlog related to projects under construction in Russia. This primarily relates to Arctic LNG2, which was awarded to us in 2019. In 2020 and 2021, nonetheless, our order intake from Russia has been no more than 6% to 8% of total orders, which will naturally lead to diminishing exposure to that geography. In terms of our P&L, in 2021, Arctic LNG2 was at peak volumes, and Russia accounted for around 35% of revenues. However, looking at 2022, the proportion of our estimated revenue from Russia, assuming business continuity, would have lowered to 20% of the aggregated revenues, and trend down further in 2023 and beyond. And in our EBIT terms, we expect any potential impact to be even less, as Russia was estimated to contribute only 15% of our EBIT.

As Bruno will discuss later on, what this means is that our 2022 EBIT margin should remain broadly in line with 2021 regardless of our exposure to Russia. This is supported by our long experience of managing contracts in difficult and complex environments. We understand the contractual mechanisms and protections, which are crucial to mitigate risk, and to sustain the performance of the company. Our contracting discipline ensures positive cash. And if the situation requires, for example, under suspension or termination situations, we would have the means to demobilize and pay our subcontractors, all without negative financial exposure.

We are financially robust with gross cash of EUR 3.8 billion and liquidity of EUR 4.5 billion. As evidenced by the dividend we are proposing today, our capital allocation framework is intact. And we clearly have the capacity and ambition to invest in our strategy.

In summary, Technip Energies is far from a pure Russian LNG play. We are global, geographically diverse company with an energy transition strategy. And this is more relevant than ever as the current situation will likely accelerate the energy independence and energy transition agenda, notably in Europe.

Key operational highlights

Turning to our operations. We delivered fourth quarter revenue growth of 10% year-over- year with an excellent performance from Technology, Products and Services, TPS, as well as continued momentum in project delivery. This really represents strong progress despite a challenging environment related to the pandemic with our operational teams continuing to rise to the challenge.

Strategically important awards in Q4 2021

Turning to our commercial highlights, the fourth quarter saw us secure multiple strategically important awards in both TPS and project delivery and notably in the domains of carbon

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capture, sustainable chemistry and ethylene. In the carbon capture market, our co- investment alongside our partner Shell for the Cansolv technology has started to yield success.

In the U.K., Technip Energies is leading a consortium alongside Shell and GE Gas Power for BP's Net Zero Teesside project, where we are performing a FEED competition for power station with 2 million tonnes per annum of carbon capture facility. And we are also supporting Shell on other projects in the U.K. and the U.S.

In addition, the Ghasha mega project in the UAE will see us design a carbon capture unit to be integrated into the development. This is yet another example of how traditional industries are also decarbonizing.

Turning to sustainable chemistry. Our PMC team has been awarded FEED and early EPC services for 100-million-pound Wastefront recycling plant in the U.K. with the capacity to process 80,000 tonnes per annum of used tyres. But we also entered into a strategic partnership with Wastefront to deploy their unique circular model globally. Our proprietary Hummingbird technology continues to enjoy success in the renewable fuels domain with FEED studies awarded by LanzaJet for 2 near identical sustainable aviation fuel units in the U.K. and the Netherlands.

Finally, in project delivery, the Borouge 4 project is a substantial EPC award and a particularly pleasing win as the strength of our technology offering yielded the strongest life of project economics. In summary, a positive conclusion to a very successful year, commercially, for Technip Energies.

Disciplined commercial approach reduces risk

Before handing over to Bruno, I want to say a bit more about our commercial model because it's really at the heart of how we manage the business, and what sets us apart. In addition to our well-known selectivity criteria, in the past year, we have added ESG as a key metric. This means that we assess a project's potential to integrate sustainable development and contribute to the Paris goals. We promote decarbonized solution in front-end design and tender phases, and ensure we are mitigating environmental impact. And we will scrutinize whether it meets our high compliance and government standards.

Turning now to our ground rules. Being engaged early, meaning T.EN executing the FEED study, gives us the chance to define and optimize a project's scope. This considerably de-risks execution as well as ensuring economic variability. And this early engagement is a prerequisite for us when bidding on the only large-scale EPC with lump sum content. Let me repeat: we will not enter into large EPC projects without it.

Beyond early engagement, it's all about discipline in our contractual negotiations. Every contractual framework has to be compliant with our risk management policy, and ensure that we are rewarded for the risk we take and protected from risks beyond our control. Supported by our asset-light model, at Technip Energies, there is no such thing as a must-win project. We continue to mitigate risk and exposure throughout the contractual phase, notably in procurement. When we sign contracts, we also sign back-to-back with our supply chain to ensure that a very large proportion of our costs are locked in at the point of signature. When

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it's not possible to do this, we use escalation clauses or go reimbursable. And we consistently monitor progress on our portfolio through monthly project management reviews, with intense focus on project progress and cash flows.

So in summary, our disciplined commercial approach reduces risks, ensures quality of backlog and provide consistency in performance. And we are confident this discipline will serve us well as we embark on our energy transition journey and enter new markets.

I will now turn the call over to Bruno to discuss our financial performance in more detail.

Financial Highlights

Bruno Vibert

CFO, Technip Energies

Solid all-round performance in 2021

Thanks, Arnaud, and good afternoon, everyone. So turning to the highlights of our financial performance for 2021, adjusted revenues grew by 11% year-on-year to EUR 6.7 billion, with strong activity levels overall, including solid growth for project delivery and an excellent performance for technology products and services, where revenues grew by over 20%. Adjusted recurring EBIT was EUR 431 million, equating to a margin of 6.5%. That's a 60-basis point improvement versus 2020, benefiting from strong execution on projects heading towards completion as well as a higher activity level and a favorable mix in TPS.

The bottom line is also very strong, with adjusted net profit 20% higher than the prior year at EUR 251 million. Adjusted order intake was EUR 9.8 billion, a significant improvement versus the EUR 4.3 billion in 2020, leading to a book-to-bill of 1.5. Net cash at period end was EUR

3.1 billion. In summary, a very robust first year for Technip Energies as an independent company.

Projects Delivery

Turning to our segment reporting and starting with project delivery, with the pandemic continuing to present challenges through the year, which included a patchwork of varying local COVID restrictions as well as constraints around logistics. 2021 was not an easy environment to achieve growth in a project business. So all credit to our teams, who helped to deliver an impressive 8% growth year-over-year to EUR 5.4 billion, benefiting from significant activity on Arctic LNG2 and the ramp-up of recently awarded LNG and downstream projects. This more than offset the lower contribution from downstream projects in a more mature phase.

Adjusted EBIT for the segment was EUR 342 million, equating to a margin of 6.4%, quite stable year-over-year. It is worth noting, however, that the 2020 margin excluded COVID costs, whereas in 2021, we absorbed such costs into our recurring EBIT. Therefore, on a like- for-like basis, margins were actually up about 50 basis points. Book-to-bill for the year was strong at 1.6%, and benefiting from the substantial award of Borouge in the fourth quarter as well as Qatar NFE in the first quarter. Backlog ended up 30% year-over-year. So overall, a robust and resilient performance by project delivery.

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