Fincantieri SpA

MIL:FCT

Earnings Call Transcript 2020-Q1

[Operator]

Good morning. This is the Chorus Call conference operator. Welcome, and thank you for joining the Fincantieri First Quarter 2020 Results Conference Call. [Operator Instructions] At this time, I would like to turn the conference over to Mr. Maestrini, General Manager of Fincantieri. Please go ahead, sir.

[Alberto Maestrini, executive]

Good morning, ladies and gentlemen. I will start providing you with some highlights on the Fincantieri group results for the first quarter of 2020. Starting, of course, with the situation caused by the COVID-19 pandemic.

This year has been characterized by this outbreak. As previously announced, we have promptly deployed all the necessary measures to prevent the further spreading of the virus in our shipyards, production site and offices as of March 16, aiming to protect as much as possible the health of our employees and our subcontractors. Since April 20, we started to gradually resume our production activities. But the process to reach production at full capacity will take several weeks and will not be completed before May 20 in order to guard the safety of all our workers. The safety measures include cutting-edge technology for contactless thermal scanning developed by one of our group companies, namely Insis.

It's worthwhile to recall the extreme complexity of shipbuilding processes and products. Nonetheless, I want to applause our people because they prove to be capable to manage them effectively, balancing out safety and working needs. We presently have a presence above 80% and we expect to complete our restart before the end of the month.

As a consequence of the stop in March, our production volumes in the first quarter recorded a 20% reduction compared to the potential outcome.

Let's now take a look at our operations. First and foremost, I would like to stress the group's efforts to maintain and reinforce the relationship with our strategic clients, especially in the cruise business, which took the largest hit on the pandemic.

We have ongoing dialogues with our clients. We are assessing delivery dates and cash installments to shelter them from the heavy cash burden caused by the pandemic. Our top priority is to avoid any cancellation of acquired orders. The safeguard of our backlog is the key focus, not only for our group but also for all the almost 6,000 small and midsized companies working for us and with us.

Despite the COVID-19 outbreak, the first months of 2020 draw to light many successes. No later than 2 weeks ago, 2 noteworthy results were achieved in a span of 4 days. So the first one, our American subsidiary, Fincantieri Marinette Marine, was awarded with a nearly $800 million contract by the U.S. Navy within the framework of the FFG(X) standard, rewarding a bidding effort that lasted almost 2 years. The second one relates to the success of our Italian subsidiary, Fincantieri Infrastructure. It was able to complete the raise of the last steel span of the new bridge in record time. This achievement shows what we wish to call the Fincantieri model, the recognized capacity to deliver on time and on budget as we continuously do while building ships.

In 2019, we launched and completed our reorganization plan for our subsidiary Vard. As a result on the first quarter of the year, I'm happy to say the subsidy reached the breakeven point at EBITDA level. It should also be noted how the diversification strategy that we set for the Norwegian subsidiary was indeed validated by the acquisition in the last 4 months of 2 remarkable orders: the first one for a sophisticated fishery unit, and the second one for service operation vessels to be operated in offshore wind farms, marking the entrance of our subsidiary in the promising sector of renewable energy. But let's remember that we have another division working on renewable energy, which is our mechanical division with the [ interiors ].

We confirm once again our commitment to make Fincantieri a more sustainable business. Fincantieri efforts to fight against climate change were also acknowledged by the Carbon Disclosure Project, which appointed to our group the higher rating B. Our efforts were also awarded by the Vigeo Eiris, a company that evaluates organizations' integration of social, environmental and governance factors into their strategies, operation and management. They position Fincantieri in the highest place among its peers.

As for Fincantieri Chantiers de l'Atlantique transaction, the investigation by EU antitrust authority is still on hold as of March 13. No update has been provided since then.

Finally, I would like to briefly comment on the recent news of Thyssenkrupp and Fincantieri talks to form a warship champion, as Reuters stated. As you know, we have a long-standing and successful cooperation with Thyssenkrupp to build the U212 class submarines for the Italian Navy. While all discussions in progress are limited to the submarine program, this cooperation clearly represents a solid opportunity to talk about future scenarios of European consolidations. Several reasons show why the consolidation of European neighbor industries work. European players do not have the right critical mass to compete against very large international competitors and to create the financial and operational synergies needed to be competitive in export. Consolidation is also an important step forward to create a common European defense, which will guarantee larger volumes to help containing research and development costs for our industries. Let us remember, that Europe cannot continue to pay 29 different frigate platforms against 4 in the U.S.

Let us now move on to the Q1 figures. Despite production downtime, Q1 revenues decreased by only 4.5% compared to the same quarter of 2019. The downtime in production activities led to a shortage of approximately EUR 190 million in revenues. Our EBITDA at EUR 72 million and our EBITDA margin at 5.5% suffered as well from the lack of progress in shipbuilding projects, resulting in a shortfall of approximately EUR 15 million at EBITDA level.

Due to the COVID-19 outbreak and in addition to the shortfall in EBITDA, Fincantieri incurred the extraordinary expenses for the amount of EUR 23 million. Among them, expenses to ensure our personal health and safety, like personal protective equipment and reduced operating leverage due to lower production volumes, led by production downturn in all Italian shipyard and production sites caused this downfall.

Net debt is at EUR 444 million from EUR 736 million at December 31. It is consistent with production volumes of the period and with cruise delivery schedule. Our total backlog consisting in 92 units stood at EUR 32 billion, approximately, covering 5.5x 219 -- 2019 revenues, sorry, with a backlog of EUR 27.7 billion and a soft backlog of EUR 4.2 billion.

During the first 3 months of the year, we successfully delivered the 8 vessels from 6 different shippers, among which 2 cruise vessels, 1 expedition vessel and 1 naval unit.

I will now leave the floor to our CFO, Giuseppe Dado, who will guide you through the details of the group 2020 first quarter results.

[Giuseppe Dado, executive]

Okay. Good morning, everybody. On to 7 of the presentation. Starting with the backlog, which as Mr. Maestrini mentioned before, as of the end of March, it's EUR 32 billion, still very high and still more than 5x 2019 revenues. Please note, the order intake was minimal compared to the first quarter of last year. But the first quarter of last year, as you all very well remember, was the best quarter ever in terms of order intake. We had orders for 11 cruise vessels. Therefore, it's not, let me say, a comparable time frame.

Let's move then to Page 8, backlog deployment. We had 8 vessels delivered in the quarter, 4 of which where cruise vessels. We have 4 deliveries of cruise vessels for the remaining part of the year. But of course, here, as we mentioned before, negotiations are in progress with ship owners to arrange new delivery schedules. Therefore, we can consider these figures are subject to change in the near future.

On revenues. They were -- on Page 9 now, EUR 1.307 billion, broadly in line with Q1 2019. Of course, they would have been much higher if we did not have the shutdown of the yard starting from mid-March. This shutdown, as we mentioned before, caused a 20% year-over-year reduction in production volumes with an estimated loss of revenues in the range of EUR 190 million.

Within the segment, Shipbuilding revenues are slightly higher compared to last year, 1.3% higher, with a slight increase in both cruise revenues and naval revenues. The decrease, the remarkable decrease in offshore revenues, minus 38% is, of course, still attributable to the market environment, the lack of new orders.

In the Offshore segment, although we continue to see signs of diversification of the capacity of our to acquire vessels that are similar to the core business in which they operated, but they are deployed in different markets. I make reference to the order we got from the -- from a supportive operation vessel for the wind industry that we announced slightly after the publication of the first -- the last year results.

Equipment, Systems and Services revenues were up 20% year-over-year thanks to the positive contribution of the -- of course, the building product for the Polcevera bridge and revenues coming from the outfitting and repair division.

Moving on to EBITDA on Page 10. As we mentioned before, EBITDA was affected by the suspension of operations in the quarter. We closed at EUR 72 million as of March 31 versus EUR 92 million of last year. The margin over revenues is at 5.5%. Due to the shutdown that we started in mid-March, we estimated a shortfall in EBITDA in the contribution coming from the loss of revenues of EUR 15 million.

On Shipbuilding, EBITDA was EUR 72 million and of course, Shipbuilding is the segment that has suffered, in particular, the consequences of the shutdown of operations. As we said previously, we -- the shutdown only concerned the Italian yards, whilst the other geographies like Romania, Norway and the U.S. notably did not have a production halt.

We've reached a substantial breakeven for the offshore support vessels segment, a negative EUR 1 million, and this is in line with -- this is the result, I would say, of the profound reorganization that we implemented and deployed last year in Vard. Of course, we do expect to continue in this path, albeit the challenging moment that we are going through.

The margin in Equipment, Systems and Services was partially diluted by the different mix of products that we have delivered over the period. And these products, among which we include the Polcevera bridge. Despite having a low profitability profile, these projects are strategically important for the group, and they fall within the diversification strategy.

Moving on to the COVID-related extraordinary costs of EUR 23 million, which are not included in the EBITDA calculation and will be booked under extraordinary items when we will publish full-blown financial statements. They are related to -- they have 2 components, I would say: reduced operating leverage coming from the reduction of revenues on the back of the shutdown of the yards; and of course, extraordinary expenses for all the tools and safety measures that we have implemented in our premises and in our offices in order to guarantee the safety of the employees.

I'm now on Page 11, the net working capital and net debt. Compared to the end of last year, we have a decrease of net working capital, negative EUR 417 million coming from EUR 125 million in the end of fiscal year 2019. Of course, all the changes in net working capital are mainly due to the fact that in the first 2 months of the year, we delivered 2 cruise vessels. Therefore, we decreased mainly our work in progress and cashed in the delivery payment. And you will see that net -- of course, we also have a reduction in construction loans. You will see that net debt levels mirror almost exactly the net working capital changes. And again, this is mainly attributable to the fact that we delivered 2 cruise vessels.

A bit of outlook on the cruise industry on Page 12. 2020 will be a challenging year for both the shipowners and shipbuilders. And of course, the severe hit of the crisis has painfully shaken both the tourism and cruising industry. All the major cruise operators have recently withdrawn their guidance. And of course, because right now, the consequences or the long-term consequences of the pandemic are still yes, very predictable, I would say.

And of course, being forced to expand their operations when travel bans and lockdowns were imposed back in mid-March. Cruise operators have been trying to weather the crisis and preserve going concern by applying, among other measures, also for the debt holiday schemes through the ECA, export credit agencies. This is a solution implemented by the Export Credit System, which you all know that it's one of the main sources of financing for cruise operators when it comes to new builds and new cruise vessels. Basically, what it's -- the export credit agencies, at European level, have proposed a standstill on principal payments of ECA financings -- existing ECA financing and ECA financings being drawn upon in -- within the debt holiday within the year, starting from April 1, 2020 until March 31, 2021. And this, of course, gives some more room for the cruise operators to manage their cash needs during these times.

And of course, even when the worst will be over, uncertainty about timing of full industry recovery remains high. Subject to the restriction -- the easing of government restrictions, a measured comeback is expected around third quarter of this year. Of course, what the cruise operators have done, they offered a flexible cancellation policies. And within these policies, we -- it's public information, vouchers are very popular among cruises to the point that among the operators, the Royal Caribbean stated in a company note that no major disruption is expected when it comes to 2021 booked position.

Of course, we are working, as Fincantieri, with the main cruise industry operators to implement, onboard cruise ships, technological solutions aimed at ensuring continuous sanitation of the vessels against both bacteria and viruses. Of course, the real challenge here for cruise operators will be to acquire new customers in a business in which repeat cruisers are very high. On average, 55% of total cruise passengers have done -- are repeating cruises. Therefore, the market has a very strong base, customer base, and this is good in terms of expectations of a recovery.

Moving on to Page 13, as far as the company outlook. Despite being yet too early to assess the full impact of the pandemic outbreak, fiscal year 2020 results, of course, will see lower production volumes than the potential -- than expected. And therefore, a potential shortfall in EBITDA contribution, and of course, the extra costs incurred for health and safety. And mainly health and safety and lower absorption -- lower operating leverage, I would say. We are heavily committed to preserving backlog, as we mentioned before because we believe, of course, that it's a must to preserve our growth strategy and our leadership in what we do.

We also firmly believe that by continuing to pursue new opportunities in diversified markets will help us weather the cyclical lows that we are seeing right now in the cruise business. And we -- the recent months prove that we are able and very successful in pursuing the new opportunities in the market, in the naval business, in new markets for Vard and in new markets that go beyond shipbuilding activity. And the effect of the pandemic outbreak on group's operations is, at the moment, difficult to quantify. Of course, we keep suspending our guidance for the year.

This is it, and we are all happy to take questions now.

[Operator]

[Operator Instructions]The first question is from Monica Bosio with Banca IMI Intesa Sanpaolo.

[Monica Bosio, analyst]

I hope you can hear me well because there is a [ bounce in the line ].

[Giuseppe Dado, executive]

Yes, we can hear you.

[Monica Bosio, analyst]

Okay. Perfect. The first question is, I know that it's difficult to assess the full impact of COVID on the full year. But maybe you can help us to try to quantify the impact of the shortfall in EBITDA in the second quarter in terms of lower production volume and also in terms of extra costs below the EBITDA line this year? And it could be useful.

And as for the Offshore division, the results were pretty good. Basically, you achieved the breakeven. Do you expect to keep this trend also for the next quarters or even to improve it?

[Giuseppe Dado, executive]

Okay. Monica. As of the impact of the COVID-19 pandemic, we can, at this point, at this moment, we can discuss it from a qualitative standpoint. You -- we mentioned what happened in the first quarter, first of all, first quarter is 3 months of production. And in a 3-month period, closing -- halting operations for 2 weeks, it has had a heavy impact on the results, of course. What can we expect for the second quarter? First of all, production halt in the second quarter was done -- in the month of April, was done by using the subsidies, the cash [ introduction ] coming from the government. Therefore, maybe you will see a partial offset of a lower operating leverage. But to give you a metric on the possible impact in terms of revenues in the future because roughly 20% less in production time, EUR 190 million less in revenues. So you can do the math. EUR 15 million of less EBITDA contribution, 2 weeks. Therefore, I mean, I'm sure this is a good start for you and your models to...

[Monica Bosio, analyst]

Yes, we can do a proportion.

[Giuseppe Dado, executive]

Well, you could do whatever you want. But I'm not -- I don't pretend to do your business, you do it. Sometimes you -- and I'm speaking to the category, of course, not to yourself, specifically. You end up maybe missing estimates or being too quantitative, but we gave you -- I think we gave you a fair and complete representation of what has happened. Of course, the times require a prudent approach, I would say, okay, from our side. Then you can do whatever you want, as long as you reach the right conclusions, I would say.

And on question #2, the Offshore division, yes, we are happy of the results of the Offshore division. And of course, albeit, we do not disclose specifically, we also are happy about the results of the cruise divisions of our -- the terms of operating performance. They both realized what we envisaged at the end of last year. And our intention and what we see is to continue on this path for the whole 2020. So we did a deep, deep restructuring of Vard, both in terms of organization, the people, the processes. We reestimated cost of completion of the projects. Therefore, we cleaned up the situation. And the first quarter is a proof that what we have done so far has paid off. It is our intention to continue on this path, okay? As again, as I mentioned before, a prudent approach is wise right now. A prudent approach requires not to pronounce the word improvement, and that was the second part of your second question.

[Operator]

Next question is from Alessandro Pozzi with Mediobanca.

[Alessandro Pozzi, analyst]

The first one is on the delivery schedule. I've seen that has not changed from Q4. But I guess that's going to change in the next few months. I was wondering, can you give us an update on the status of the negotiations with your clients, with the cruise operators with regards to deliveries this year in 2021? And I was wondering, I mean, if an operator doesn't want to take delivery this year, how are you trying to accommodate that? Is there going to be extra cost? And how you sit down and try to sort out those issues as well? And also I think as we look at 2023, '24, I was wondering whether operators are looking maybe to delay those deliveries as well.

[Giuseppe Dado, executive]

Well, on your first question, the update is that the negotiations are still ongoing. And as we both -- as both ourselves and most of our clients are public companies, it's wise to decline any further comments on this. We are negotiating a rearrangement of the delivery schedule. I mean one thing is sure, one thing we can say, we did not have any cancellations, okay? So no -- the target of our strategy here is to keep our backlog. So no cancellations. And so far, we are able to say that no cancellations so far. When we will reach final agreements, we will disclose accordingly. And it's the rearrangement of delivery schedules of course, it's being negotiated to accommodate customer needs and our needs as well because the interruption of production has forcibly caused a potential postponement of the delivery, albeit this falls within the force majeure clauses of any contract. Again, it's done in the mutual interest of both parties. Therefore, we do not expect to incur into extra costs for late delivery.

Are there extra costs other than lower production volumes because production will be somehow lower this year? Of course, in 2021, we are not done, and we have not done any calculation so far. But of course, this will be -- will cause a ramp-up in production in 2021 since we are slowing down in 2020.

And this gets me to your third question, on 2023, 2024 deliveries, I said, no cancellations, and this, of course, falls within this statement and this is not a statement, this is a state of reality, actually. We do not expect any change in the delivery schedules and in delivery programs of 2023, 2024. I mean if it's -- a strong point on the strategy of owners is that maybe if their fleet is too big for the current and future near-term demand levels, maybe they can work on getting rid of old ships instead of canceling CapEx. I think this is a wise strategy on the side of the cruise or shipowners.

[Alessandro Pozzi, analyst]

Okay. That's fine. A very clear. And second question on the net debt, clearly, a meaningful improvement in Q1. But I was wondering, probably we may see that increasing going forward, especially in Q2. Is there any indication or even qualitative that you can give us on the evolution of the net debt?

[Giuseppe Dado, executive]

Well, you just gave a qualitative indication of net debt. We're, of course, going to see an increase in net debt, considering that with the postponement of delivery dates, you also have the postponement of the cash in. What's important to know right now is the group has sufficient financial resources to weather this period. We have always kept substantial credit lines with the banking system, and you know that in the past, we have diversified sources of financing, means of financing, including commercial paper programs, construction financing, revolving credit facilities. We don't have any covenants. We -- our long-term debt maturity profile is -- sees that 2023 is the year in which we refund our long-term loans. So we are in pretty good shape, to say the least, financially. And we are, at this point in time, able to support our strategy of keeping and safeguarding the backlog and the relationship with clients.

[Alessandro Pozzi, analyst]

Perhaps I was wondering if you can give us an update on the -- how much liquidity you have available at this point?

[Giuseppe Dado, executive]

One to -- as of 2 days ago, EUR 1.4 billion in cash.

[Alessandro Pozzi, analyst]

All right. All right. Any undrawn facilities?

[Giuseppe Dado, executive]

Sorry? We do have undrawn facilities. We are negotiating a further increase of our facilities. Again, I told you that right now, we don't have any concerns, and you're going to leave with that.

[Operator]

[Operator Instructions] The next question is from Matteo Bonizzoni with Kepler Cheuvreux.

[Matteo Bonizzoni, analyst]

Just a clarification. This EUR 50 million of shortfall EBITDA is included in the EUR 72 million or it's included in the EUR 23 million of overall extraordinary costs? So just to understand. And then the second question is, if you can a little bit comment on the other opportunities in which you are enjoying in [ Narala ] in Italy, in [ Torada ] after the award of the contract in the U.S.

[Giuseppe Dado, executive]

The EUR 15 million are not included, of course, in the EUR 72 million. Let me say it in another way. If I did not have the production shutdown for the 2 weeks of March, the EBITDA levels would have been at least EUR 15 million higher, okay? And they are not, of course, included into the EUR 23 million because the EUR 15 million is simply the lack of contribution coming from the lack of revenues. So I did not have the revenues, I did not have the costs, okay? So this is the difference between revenues and external costs. The EUR 23 million include the cost arising from a lower operating leverage. So the absorption -- the lack of absorption of fixed costs, extra costs for safety measure, safety and health measures. And within the EUR 23 million, we also included the share of depreciation and amortization of the fixed costs that we did not absorb with the shutdown in a way.

So to give you one more piece of information. If you take EBITDA levels at EUR 72 million, it's not -- it's too much if you take the EUR 23 million and you apply and you calculate an adjusted EBITDA with -- including all the EUR 23 million. The share of EBITDA -- of the cost that would go in EBITDA is fairly lower, okay? It's more in the, well, double digit, but is more in the range of EUR 15 million, okay?

Please also consider that the fact that we did not use the extraordinary measures deployed by the government, which were deployed after we announced the shutdown. Of course, we have had some extra costs there because we put people on holiday. You won't see this repeating in the month of April because in the month of April, we used the government subsidies, okay?

On the second question, I believe Mr. Maestrini wants to say something on the opportunities on the naval business.

[Alberto Maestrini, executive]

First of all, the -- I think the comment I want to make is that the win we just had in the U.S. market shows 2 things. One, that we have a very valid naval design in our portfolio. We have design that have been approved in real operation and that our design are flexible enough to be customized according to the navies that want further. For this reason, I think we are very well positioned to go in export markets and win new opportunities worldwide. Bear also in mind that we are significantly investing in technologies in electronics and software, in cybersecurity, artificial intelligence and all these technologies will help us provide our customers with the -- always the best solution for their needs. For this reason, we are very confident that in the future, our naval division will be able to bring home new successes.

[Operator]

The next question is from Gabriele Gambarova with Banca Akros.

[Gabriele Gambarova, analyst]

Regarding the -- this outstanding achievement on the FFG(X) program in the U.S., I was wondering if this huge program will impose some kind of additional CapEx in the near future. And then if you can tell me in terms of, let's say, margins, if you think it will be accretive, dilutive versus, let's say, the naval margins, naval profitability. This is my first question.

[Giuseppe Dado, executive]

Well, CapEx on the program are not, let me say, material. And there is a CapEx program, of course. I have to say that the contract value pays off the CapEx program. And on top of this, we will enjoy support from the state of Wisconsin on -- in the form of grants for the CapEx program.

On the margin, I do not want to comment. What I really don't understand sometimes, and this is a question of me to you, it's -- obviously, your focus on margins. Margins will be good. Margins will be good, but you missed a point. This project, as Mr. Maestrini said, is very important for us. As it -- of course, it falls within the relationship that we had with the U.S. Navy, we developed with the U.S. Navy under the LCS program. And it is what I call a true quantum leap in our strategy because being able to build frigates for the U.S. Navy, it is very important. And of course, it may be helpful in negotiations with other navies. I think it's -- at this point in time, we need to secure that, and it's pretty -- pardon me, but it's pretty short sighted to speak about margins here, okay?

[Gabriele Gambarova, analyst]

Okay. And listen, regarding your Q1 results, I mean, the top line was just down by 4.5% despite the reduction of production time of 20%. I mean I missed something because...

[Giuseppe Dado, executive]

Well, Gabriele, I know what you're missing. You're missing reading the business because if you keep comparing strongly our -- the company performance, with respect, I know that the regulatory requirements require us to publish a comparison between the first quarter of the year versus the first quarter of last year. But it's -- looking at our company, strictly in this way, is wrong. I'm telling you what are you missing. I'm telling you that my revenues, my value production in the first quarter of 2020 was broadly in line with 2019. And I say this because we have to say it. I gave you the loss of revenues for 2 weeks, EUR 190 million. Despite COVID, revenues in cruise shipbuilding activity and naval shipbuilding activity were slightly higher. I don't understand what you're missing then.

[Gabriele Gambarova, analyst]

No. Just was trying to understand if -- the business was doing so well until, let's say, 15th of March. I mean this is the explanation. The business was up strongly before the lockdown and then we lost around EUR 190 million, and you reached this...

[Giuseppe Dado, executive]

What's wrong with being up? Do we have always to be down? I don't understand your question, Gabriele.

[Gabriele Gambarova, analyst]

Yes. I'm trying to understand the performance in Q1. I don't think there is anything strange in this. So it means that the business was very sound until the day before the lockdown and then you had this loss of EUR 190 million because of the lockdown. I'm just wondering if this is the explanation.

[Giuseppe Dado, executive]

Yes. It is the explanation. We kept saying and communicating in previous quarters, that in previous years, we have been in a growth, in a stable growth path in revenues and EBITDA, even aside the hiccup we had last year on Vard. But as far as shipbuilding goes, the story is we are growing, okay? Of course, this pandemic has changed the story dramatically suddenly.

If you do really a really rough math, a half -- if you calculate monthly revenues, they are in the range of EUR 500 million per month. EUR 6 billion last year, okay? We lost half a month. EUR 190 million, okay? You account for the different mix of the different businesses that we have. But I mean, the math is very simple. I don't understand what -- there is nothing strange. Your reading of the situation is what -- it's in the numbers. I don't know. I don't understand to what conclusion you want to go.

[Gabriele Gambarova, analyst]

I'm not looking for conclusions. I mean I was just -- I mean I just wanted to understand the trend across the quarter. And you explained me very well. No, I was surprised only because I was expecting the cruise business to go up only moderately. That's it. I'm not hinting anything. There isn't anything strange at all. I was just surprised because I was expecting, say, a mid-single-digit growth in the cruise. And instead, there was a very strong growth in Q1, full stop.

[Giuseppe Dado, executive]

Yes, the growth would have been very strong without the production outage. But this falls within the growth path we have had in the past few years. I mean of course, we are going to update that. But when we presented the business plan in 2018, you remember that by 2022, we plotted a revenue growth, a cumulative revenue growth of roughly almost 40% -- 45%. And so the right way to read it, and the only way I can -- one way I can assess is revenues, and this is what I said before, revenues if compared, you can compare it with whatever you want. But since we have to compare them with the first quarter of last year, we were broadly in line with last year, notwithstanding the pandemic. If we do not have the pandemic, we would have had a substantial growth compared to last year.

Also on the Offshore segment, we reached breakeven. You look at the first quarter of last year, we weren't breakeven in any case. What's the story here? The story is that in the following quarters of 2019, the situation deteriorated. So it's probably more meaningful to compare the first quarter of 2020 with the last quarter of 2019 instead of comparing it with the first quarter of 2019, okay? I mean the -- this is to say that the draft that you try to fit upon us is sometimes too tight and too limited. And I see that there is something missing on your side, not on my side. Is that clear?

[Operator]

The next question is a follow-up from Monica Bosio with Banca IMI Intesa Sanpaolo.

[Monica Bosio, analyst]

Yes. Here I am again. Just a quick question. Is it possible, maybe it's not, to quantify the impact of the government subsidies in the second quarter, this could help to mitigate the volume slowdown at the EBITDA level? And is it possible to rely on the CIGO, government subsidies also over the rest of the year?

And the second question is on the U.S. Navy order for EUR 800 million -- sorry, $800 million. Do you expect to account the advances already in 2020? And there should be also the advances from the Egyptian order that could add to the free cash flow of the group. Is it correct?

[Giuseppe Dado, executive]

I'll start with the last question. As we said several times, the naval projects enjoy payments according to milestones, especially projects in the U.S. And with project in the U.S., and this is different from other exports. And of course, this project is not an export project because it's done in the U.S. by American company. We do not have large chunks of advanced payments there. So the effect on cash flow, I see no effect on cash flow in 2020 for this project. As far as the Egyptian project, I mean, this is something we have not officially announced. This is something not signed. It's rumors in the practice, so I'm not going to comment on that.

Going to your first question, the government subsidies on workers' compensation and on the workers' pay, no, I'm not going to give you a precise figure. We -- I think you have the tools and elements to estimate that for the month of April since we have a total suspension of activities. And of course, the government aid will be -- we can use it, and we can use the government support as long as the government support will be there on one side. On the other side, as Mr. Maestrini said, we are slowly, albeit slowly resuming production, but at a very good pace. So we'd rather go back to work at full-blown capacity instead of using the government aid. This is to say that to make good results, we don't rely on government aid, but we want to -- and our effort is concentrated on going back to work safely, of course.

[Operator]

[Operator Instructions] Gentlemen, there are no more questions registered at this time.

[Giuseppe Dado, executive]

Okay. Thank you very much. Enjoy the rest of the day and the weekend. Bye.

[Operator]

Ladies and gentlemen, thank you for joining. The conference is now over. You may disconnect your telephone. Thank you.