Saipem shares plunge after new profit warning

Mon Jun 17, 2013 6:33am EDT
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By Lisa Jucca and Giancarlo Navach

MILAN (Reuters) - Saipem's (SPMI.MI: Quote) share price fell by as much as 25 percent on Monday, after Europe's biggest oil industry services group gave its second major profit warning in less than six months due to problems with contracts in Algeria, Mexico and Canada.

Saipem, 43-percent-owned by Italian oil company Eni (ENI.MI: Quote), said after markets closed on Friday that it now expected to make a net loss of 300 million to 350 million euros this year instead of a profit of 450 million euros.

Saipem is at the center of corruption probes in Italy and in Algeria relating to large contracts that Saipem had entered with local gas giant Sonatrach, a long-standing business partner, and had already surprised the market with a profit warning in January which it blamed on weakening contract margins.

The second surprise on Friday angered the market.

"There is no investment case," Credit Suisse said in a note to clients after slashing its share price target to 16 euros from 22 euros.

"We believe Saipem will be uninvestible until major unknowns are clarified ... We expect the shares will remain dead money and will underperform the sector."

Shares in Saipem were trading at 15.58 euros at 4:34 a.m. ET, down 22.9 percent from the close on Friday. The company has lost more than 50 percent of its value since the start of 2013.

Eni's share price fell 2.5 percent to 16.42 euros, as the oil and gas group could lose 140 million euros if Saipem were not able to distribute a dividend in 2013, traders said.   Continued...

The logo of oil company Eni-Saipem is pictured at its headquarters in Rome February 8, 2013. REUTERS/Alessandro Bianchi