Exhibit 99.1
 | 2022 INTERIM MANAGEMENT REPORT | 3 | |||
| 1.1. | Business outlook | 3 | |||
| 1.2. | 2022 Half-Year results | 4 | |||
| 1.3. | Principal risks and uncertainties | 11 | |||
| 1.4. | Related party transactions | 12 | |||
| 1.5. | Forward looking statements | 12 | |||
 | STATEMENT OF THE PERSON RESPONSIBLE FOR THE FIRST HALF OF 2022 FINANCIAL REPORT | 13 | |||
 | CONDENSED CONSOLIDATED FINANCIAL STATEMENTS | 14 | |||
| 3.1. | Condensed consolidated financial statements for the half-year ended June 30, 2022 | 14 | |||
| 3.1.1. | Condensed consolidated statement of income (UNAUDITED) | 14 | |||
| 3.1.2. | Condensed consolidated statement of comprehensive income (UNAUDITED) | 15 | |||
| 3.1.3. | Condensed consolidated statement of financial position (UNAUDITED) | 16 | |||
| 3.1.4. | Condensed consolidated statement of cash flows (UNAUDITED) | 17 | |||
| 3.1.5. | Condensed consolidated statement of changes in equity (UNAUDITED) | 18 | |||
| 3.1.6. | Notes to condensed consolidated financial statements (UNAUDITED) | 19 | |||
| HALF-YEAR REPORT ● 2022 ● TECHNIP ENERGIES | 2 |
As used herein, the “Company”, Technip Energies Group or Technip Energies refers to Technip Energies N.V. and all the companies included in the scope of consolidation.
1.1. | BUSINESS OUTLOOK |
Since the beginning of the conflict in Ukraine, Technip Energies has committed to taking care of its people and ceased to work on new business opportunities in Russia. Our activities have been carried out in compliance with all applicable laws; and our priorities are to safeguard the interests of all our stakeholders.
The April 8, 2022, European Union sanctions target goods and technology related to LNG. These will naturally have a more direct impact on the future execution of our only active project in Russia - Arctic LNG 2. In anticipation of the escalation of these sanctions, the Company has been working with clients, partners and suppliers within the relevant contractual frameworks to take appropriate measures in connection with Arctic LNG 2. The Company expects that the balance sheet position of the project and the relevant contract protections will be sufficient to fulfilll its various contractual obligations in compliance with applicable sanctions.
Prior to the Ukraine crisis, the shortage of gas in Europe was pushing up prices and stimulating demand and project activity. The war has exacerbated this trend with Europe in urgent need of securing supply. For Europe to cut its dependence on Russian gas, substantial investment will be required. While acceleration of renewable energy and additional piped gas from countries such as Norway can potentially help, the Company believes that the vast majority of Europe’s gas demand will come from LNG, which is inherently more flexible than gas in a pipe.
Europe is rapidly developing plans for more LNG imports, and the Company believes North America and the Middle East are currently the best positioned regions to respond. The current situation also means a structurally higher value for LNG in the long term. Beyond the traditional large train export terminals – which naturally will be required - the viability of other solutions including floating LNG and mid-scale LNG has improved materially. The Company’s leadership and experience position it well in FLNG; and the Company can leverage its proprietary SnapLNG concept – a modularized, low carbon and methane free solution with a compressed time to first drop. The Company will utilize this concept in delivering the FEED for Texas LNG in the USA, a pre-FID contract secured in first half 2022.
The Company continues to believe that the long-term fundamentals for natural gas - LNG in particular - remain strong given its critical role as a transition fuel, in particular through the design of low-to-zero carbon LNG infrastructure. Indeed, the EU Parliament has voted in favor of including gas in its sustainable finance taxonomy. The Company believes that the integration of carbon capture and other decarbonization solutions will be utilized in the future development of new LNG infrastructure.
In addition, the Company is confident in its ability to successfully continue delivering the projects in its diversified backlog and implementing its growth strategy in the energy transition. The Company’s strategy is centered on helping customers address the new energy challenges – and this is more relevant than ever as the current energy crisis will likely accelerate the energy transition and energy independence agenda.
The price of crude oil has increased very substantially since the lows of early 2021, with a rally of circa 50% during the first half of 2022 for oil (and circa 40% for gas) following the resumption of global economic activity. Traditional oil and gas project FIDs have experienced delays due to COVID-19 relating uncertainty and the clear trend to shift investment to energy transition or low-carbon intensive projects. Several years of underinvestment by the energy industry has also contributed to the high volatility experienced in energy markets throughout the first half of 2022. High levels of inflation combined with global recessionary fears have served to add to the uncertainty but there is political pressure on the industry to invest in new production with security of energy supply paramount, notably in Europe.
Refining and petrochemical markets have experienced some investment decisions announcements in integrated refining and petrochemical projects in China, India, the Middle East, Europe and North America. While new greenfield project activity remains limited for now, there is growing momentum in the ethylene market and the Company expects significant new capacity to be sanctioned in the coming quarters and years.
| HALF-YEAR REPORT ● 2022 ● TECHNIP ENERGIES | 3 |
 | 2022 INTERIM MANAGEMENT REPORT 2022 HALF-YEAR RESULTS |
The Company is seeking to reinforce its positioning in a growing sustainable chemistry market, exemplified by the recent award for Neste’s renewable products refinery in Rotterdam, and various industry collaborations to develop plastics circularity and bio-chemical technologies. There are positive trends in renewable fuel markets – both renewable diesel and sustainable aviation fuel (where production is set to triple by 2030), as well as second generation ethanol production.
In a very dynamic low-carbon/clean hydrogen market, through leveraging our technology scale up and integration skills and the Company’s expertise in modular solutions, the Company is developing its position in this market. During 2021, the Company observed a step change in customer engagement for green hydrogen projects that led to a 7x increase in accessible market opportunities with an aggregate capacity of more than 20 Gigawatts. The Company has engaged in several green hydrogen studies including some to maturity and while project award momentum has thus far been slow, in July 2022 the Company announced an EPCC Contract for the YURI Green Hydrogen Project in Australia.
Floating offshore wind market momentum has accelerated through the first half, and the Company continues to anticipate the potential for exponential growth to 2030 and beyond. The Company is working with several floating technologies such as its in-house INO15™, a cost-competitive floating offshore wind foundation solution that demonstrates the Company’s goal to fulfill market demand with an efficient and robust design integrating tomorrow’s turbine technology. This technology has been selected by Equinor for its Firefly development off South Korea, where Technip Energies is also performing the FEED. Also in the first half of 2022, the Company acquired a 16.3% stake in floating offshore wind company Exponential Renewables, S.L. (also referred to as X1 Wind) that has an innovative and disruptive offshore wind turbine floater with major environmental and operational benefits.
1.2. 2022 HALF-YEAR RESULTS
| ■ | Robust H1 revenues; ongoing orderly exit of Arctic LNG 2 more than offset by 18% Y/Y growth in remainder of portfolio |
| ■ | Adjusted Recurring EBIT margin of 6.3%; Adjusted net profit of €132m, up 31% Y/Y |
| ■ | Raising 2022 Adj. Rec. EBIT margin outlook, excl. Arctic LNG 2, to at least 6.8% to reflect strong YTD performance |
| ■ | H1 Energy transition orders exceed €500m (excl. LNG) and expected to reach around €1 billion by year-end |
Arnaud Pieton, Chief Executive Officer of Technip Energies, commented:
“Our teams’ resolute focus on project execution as well as effective customer and supply chain engagement, in the face of persistent external challenges, continues to yield strong results. This is best evidenced in the quarter by Coral FLNG achieving first gas in Mozambique, a delivery milestone that was in line with the original, pre-pandemic schedule. First half revenue growth was consistent with our full year financial framework and we expect our activity outside of Russia to demonstrate further growth in the second half. Strong execution of our quality backlog is driving profitability above our original guidance, leading to an increase in our full year margin outlook.”
“Regarding Arctic LNG 2 in Russia, in line with the applicable sanctions, we continue to implement an orderly exit from the project. We have suspended the vast majority of the work, and the exit process will likely take several more months due to the contract terms and the inherent size of the project. As previously stated, we do not expect any negative net financial exposure due to our contractual rights and the balance sheet position of the project.”
“In the second quarter, we were awarded key carbon capture projects, including the CCS facilities at Hafslund Oslo Celsio, the world’s largest full-scale waste-to-energy plant with CO2 capture. These awards demonstrate our leadership and the strength of our core expertise and technology approach in a market with considerable medium-to-long-term growth prospects.”
“The momentum in carbon capture also reflects a maturing of our broader energy transition pipeline. This conversion trend is confirmed by recent awards in the renewable fuels and clean hydrogen domains, which have generated more than €500 million of order intake in the first half. We are confident that award momentum will continue and we expect to reach around €1 billion of energy transition orders, excluding LNG, by the end of 2022. Furthermore, many of these awards will add to our backlog in Technology, Products & Services, thereby bolstering the medium-term growth outlook for our highest margin segment.”
“Energy market fundamentals, notably for natural gas, LNG, and renewables remain robust, supporting our strategic offering and medium-term order outlook. Despite ongoing recessionary fears, a significant increase in energy infrastructure investment will be required to satisfy demand and meet energy independence goals. The transition to a low carbon energy system is requiring innovation, technology, and technical expertise, opening a new golden age for engineering, and Technip Energies will continue to play a leading role.”
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2022 INTERIM MANAGEMENT REPORT 2022 HALF-YEAR RESULTS |  |
Key financials – Adjusted IFRS
| (In € millions, except EPS) | H1 2022 | H1 2021 |
| Revenue(1) | 3,267.0 | 3,243.2 |
| Recurring EBIT(1) | 204.4 | 204.5 |
| Recurring EBIT Margin % | 6.3% | 6.3% |
| Net profit | 131.5 | 100.3 |
| Diluted earnings per share(2) | €0.74 | €0.55 |
| Order Intake | 1,608.5 | 7,863.4 |
| Backlog | 13,439.8 | 17,473.4 |
Financial information is presented under Adjusted IFRS (see Appendix 8.0 for complete definition). Reconciliation of IFRS to non-IFRS financial measures are provided in Appendix 1.0, 2.0, 3.0.
| (1) | H1 2022 Adjusted Revenue and Recurring EBIT included €816.6 million and €27.0 million respectively from Arctic LNG 2. |
| (2) | H1 2022 and H1 2021 diluted earnings per share have been calculated using the weighted average number of outstanding shares of 178,514,257 and 181,908,563 respectively. |
Key financials - IFRS
| (In € millions, except EPS) | H1 2022 | H1 2021 |
| Revenue | 3,216.7 | 3,118.1 |
| Net profit | 119.3 | 112.4 |
| Diluted earnings per share(1) | €0.67 | €0.62 |
| (1) | H1 2022 and H1 2021 diluted earnings per share have been calculated using the weighted average number of outstanding shares of 178,514,257 and 181,908,563 respectively. |
FY 2022 Financial framework – Adjusted IFRS
| Revenue | €5.0 – 5.5 billion |
| (excludes contribution from Arctic LNG 2) | |
| Recurring EBIT margin | At least 6.8% (previously: at least 6.5%) |
| (excludes contribution from Arctic LNG 2) | |
| Effective tax rate | 28 – 32% |
Financial information is presented under Adjusted IFRS (see Appendix 8.0 for complete definition). Reconciliation of IFRS to non-IFRS financial measures are provided in Appendix 1.0, 2.0, 3.0.
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Operational and financial review
Order Intake, Backlog and Backlog Scheduling
Adjusted order intake for H1 2022 of €1,608.5 million, equivalent to a book-to-bill of 0.5. Orders in the second quarter included a large EPC contract by Hafslund Oslo Celsio for a world-first carbon capture and storage project at a waste-to-energy plant in Norway, a contract for carbon capture & storage expansion at ExxonMobil’s LaBarge facility in the USA, a pre-FID contract for project design and delivery for Texas LNG in the USA as well as other studies, services contracts and smaller projects. The first quarter included a significant EPCC contract by PETRONAS Chemicals Fertilizer Kedah for a new melamine plant with minimized CO2 footprint, and a FEED for Equinor’ floating offshore wind Firefly project in South Korea. Book-to-bill on a trailing 12 month basis is 0.5.
During H1 2022, approximately €2.0 billion relating to Arctic LNG 2 was removed from total company adjusted backlog, which results from sanctioned work that has been suspended, and is in line with our ongoing orderly exit discussions. This was a significant factor in adjusted backlog decreasing by 23% year-over-year to €13,439.8 million.
| (In € millions) | H1 2022 | H1 2021 |
| Adjusted Order Intake | 1,608.5 | 7,863.4 |
| Project Delivery | 1,033.9 | 7,196.2 |
| Technology, Products & Services | 574.6 | 667.3 |
| Adjusted Backlog | 13,439.8 | 17,473.4 |
| Project Delivery | 12,275.5 | 16,273.1 |
| Technology, Products & Services | 1,164.2 | 1,200.3 |
Reconciliation of IFRS to non-IFRS financial measures are provided in Appendix 6.0 and 7.0.
Adjusted Backlog at June 30, 2022, benefited from a foreign exchange impact of €600.0 million.
Adjusted Backlog at June 30, 2022 reflects the removal of €1,962.4 million relating to Arctic LNG 2. €846.6 million associated to Arctic LNG 2 remained in backlog at June 30, 2022.
Adjusted backlog excluding the proportion related to Arctic LNG 2 amounted to €12,593.2 million as of June 30, 2022. The table below provides estimated backlog scheduling as of June 30, 2022.
| (In € millions) | 2022 (6 M) | FY 2023 | FY 2024+ |
| Adjusted Backlog excluding Arctic LNG 2 | 2,818.1 | 3,923.4 | 5,851.7 |
Company Financial Performance
Adjusted Statement of Income
| (In € millions, except %) | H1 2022 | H1 2021 | % Change |
| Adjusted revenue | 3,267.0 | 3,243.2 | 1% |
| Adjusted EBITDA | 255.3 | 260.6 | (2%) |
| Adjusted recurring EBIT | 204.4 | 204.5 | —% |
| Non-recurring items | (1.9) | (30.6) | (94%) |
| EBIT | 202.5 | 173.9 | 16% |
| Financial income (expense), net | (9.7) | (12.0) | (19%) |
| Profit (loss) before income tax | 192.8 | 161.9 | 19% |
| Income tax (expense)/profit | (59.2) | (54.6) | 8% |
| Net profit (loss) | 133.6 | 107.3 | 25% |
| Net profit (loss) attributable to non-controlling interests | (2.1) | (7.0) | (70%) |
| Net profit (loss) attributable to Technip Energies Group | 131.5 | 100.3 | 31% |
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Business highlights
Project Delivery – Adjusted IFRS
| (In € millions, except % and bps) | H1 2022 | H1 2021 | % Change |
| Revenue | 2,623.9 | 2,622.8 | —% |
| Recurring EBIT | 167.2 | 167.4 | —% |
| Recurring EBIT Margin % | 6.4% | 6.4% | —% |
Financial information is presented under Adjusted IFRS (see Appendix 8.0 for complete definition).
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H1 2022 Adjusted Revenue was stable year-over-year at €2.6 billion. Revenues included significantly lower activity on Arctic LNG 2, which contributed €816.6 million of revenue compared to €1,168.0 million in H1 2021. Revenues excluding Arctic LNG 2 increased year-over-year by 24.2% due to the ramp-up of recently awarded LNG and downstream projects.
H1 2022 Adjusted Recurring EBIT was stable at €167.2 million, despite a significantly lower contribution from Arctic LNG 2 of €27.0 million, compared to €40.9 million in H1 2021. Excluding the contribution from Arctic LNG 2, Adjusted Recurring EBIT was €140.2 million, representing year-over-year growth of 10.8%. H1 2022 Adjusted Recurring EBIT margin was in line with the prior year at 6.4% due to solid execution, including a strong contribution from downstream and LNG projects in the latter stages of completion. This was partially offset by earlier stage LNG projects as well as the dilutive impact of Arctic LNG 2. Adjusted Recurring EBIT margin excluding the contribution from Arctic LNG 2 was 7.8%.
Q2 2022 Key operational milestones
(Please refer to Q1 2022 press release for first quarter milestones)
Qatar Energy North Field Expansion (Qatar)
| ■ | Main civil works started in all areas. |
Eni Coral Sul FLNG (Mozambique)
| ■ | Successful introduction of gas into the FLNG vessel; on track to deliver first LNG cargo in H2 2022. |
Energean Karish Gas Development (Israel)
| ■ | FPSO arrived on site, 90km offshore Israel. |
MIDOR Refinery Expansion Project (Egypt)
| ■ | Safe and on schedule achievement of ready for start-up of naphtha block after execution of major shutdown works. |
Bapco Refinery expansion (Bahrain)
| ■ | 33 million manhours without LTI (lost time injury). |
Assiut hydrocracking complex (Egypt)
| ■ | Construction started and all main process unit areas have been handed over to our teams and partners. |
Long Son Olefins plant (Vietnam)
| ■ | Pre-commissioning and commissioning activities in progress overlapping construction works completion phase. |
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| 2022 INTERIM MANAGEMENT REPORT 2022 HALF-YEAR RESULTS |
Q2 2022 Key commercial highlights
(Please refer to Q1 2022 press release for first quarter highlights)
Texas LNG (USA)
| ■ | Awarded a Pre-FID (Final Investment Decision) Engineering contract. Through a joint venture with Samsung Engineering, Technip Energies has been appointed lead project contractor charged with project design and delivery. The proposed 4.0 Mtpa (million tons per annum) LNG export facility site is strategically located on the Port of Brownsville’s deep-water ship channel in close proximity to the Gulf of Mexico. The Texas LNG project will utilize Technip Energies’ SnapLNG™ solution, which combines a compact modular design concept for mid-scale trains with standardized components and technology. Developed in collaboration with Air Products, the system benefits from speed to market, with greater certainty around both costs and schedule, and best available process technology, refrigerant compression and digitalization. As a result, this solution offers lower emissions and is particularly suited for low-to-zero carbon footprint LNG and phased developments. |
Hafslund Oslo Celsio carbon capture and storage project (Norway)
| ■ | Awarded a large* Engineering, Procurement, Construction (EPC) contract by Hafslund Oslo Celsio, the largest supplier of district heating in Norway, for a world-first carbon capture and storage (CCS) project at the waste to energy plant located in Oslo, Norway. The project will be the first full-scale waste-to-energy plant in the world with CO2 capture. 400,000 tons per year of CO2 will be captured, which is the equivalent of the emissions from around 200,000 cars and will reduce Oslo’s emissions by 17%. As part of the Longship project, the CO2 will then be liquified and exported to Northern Lights which is the first cross-border, open-source CO2 transport and storage infrastructure network. The Carbon Capture plant will use the Shell CANSOLV® CO2 Capture System, a state-of-the-art amine based technology for the capture of CO2 from the flue gas. |
| * | Note: A “large” award for Technip Energies is a contract award representing between €250 million and €500 million of revenue. |
Technology, Products & Services (TPS) – Adjusted IFRS
| (In € millions, except % and bps) | H1 2022 | H1 2021 | Change |
| Revenue | 643.0 | 620.5 | 4% |
| Recurring EBIT | 60.0 | 54.7 | 10% |
| Recurring EBIT Margin % | 9.3% | 8.8% | 50 bps |
Financial information is presented under Adjusted IFRS (see Appendix 8.0 for complete definition).
H1 2022 Adjusted Revenue increased year-over-year by 4% to €643.0 million, driven by growth in demand for Process Technology activity including licensing and proprietary equipment (notably for ethylene, and biochemicals, including EPICEROL®) and sustained engineering services and Project Management and Consultancy activity.
H1 2022 Adjusted Recurring EBIT increased year-over-year by 10% to €60.0 million. H1 2022 Adjusted Recurring EBIT margin increased year-over-year by 50 basis points to 9.3%, benefiting from Process Technology licensing and proprietary equipment activity (notably in Sustainable Chemistry) and higher activity levels for advisory services performed by Genesis. This growth was achieved despite higher selling and tendering activity in growth markets.
Q2 2022 Key operational milestones
(Please refer to Q1 2022 press release for first quarter milestones)
NESTE Renewable Fuels Expansion (Singapore)
| ■ | Pre-commissioning activities ongoing while majority of piping installation has been completed. Electrical and instrumentation works ongoing. |
Deepak Phenolics - Iso-propyl Alcohol (IPA) plant (India)
| ■ | Our Badger technology is used for Deepak Phenolics’ second IPA plant in Dahej, India. |
Northern Lights CO2 Transport and Storage Project (Norway)
| ■ | Loading Systems achieves successful Factory Acceptance Tests on the world’s first 3 loading arms for the Liquefied CO2 storage project. |
OMV EARTH Revamp (Austria)
| ■ | Installation of our EARTH® technology in a large-scale hydrogen plant at site at Schwechat. |
LFB Arras (France)
| ■ | First phase of high-profile plasma fractionation pharmaceutical project is nearing completion, with the second phase underway. Combined, both phases represent 2.5 million direct manhours on site. |
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Q2 2022 Key commercial highlights
(Please refer to Q1 2022 press release for first quarter highlights)
OCIKUMHO 100 KTA EPICEROL® plant (Malaysia)
| ■ | License agreement for a 100 kilotons per annum (kta) EPICEROL® plant for the production of epichlorohydrin (ECH) from glycerine. Using a bio-based raw material, OCIKUMHO’s unit will be integrated into a new processing complex using electricity made by hydro power, in Sarawak, Malaysia to serve the growing ECH market. OCIKUMHO will be the first to manufacture epichlorohydrin in Malaysia. |
IVERSON efuels green ammonia production project (Norway)
| ■ | Selected to perform the engineering design of a complete green ammonia plant at Sauda, Rogaland, Norway. Phase 1 of the project includes a green ammonia plant including utilities, offsites and electrical substation connected to the existing power grid, and pipeline, ammonia storage and offloading system. The planned green ammonia production will be used as fuel for the maritime sector. The Iverson project will have an initial electrolysis capacity of 300 megawatts to produce 600 metric tons of green ammonia per day. IVERSON eFuels AS targets with a significant scale up production in the future. IVERSON eFuels AS is Special Purpose Vehicle between CIP, Hy2gen and Trafigura. |
ExxonMobil LaBarge carbon capture & storage facility (USA)
| ■ | In Consortium with Saulsbury Industries, Technip Energies has been awarded a contract for the Engineering, Procurement and Construction (EPC) to expand the carbon capture and storage (CCS) at ExxonMobil’s LaBarge, Wyoming facility. The LaBarge plant has already captured more CO2 than any other facility in the world. The plant has capacity to capture more than 6 million metric tons per year, and this expansion project will enable the capture of more than one million additional metric tons of CO2 per year. The expansion will consist of a modification of the existing gas treatment facility to increase the carbon capture capacity and the installation of pipeline to transport the CO2 to the reservoir where it will be stored. Technip Energies will be responsible for the engineering and procurement services, while Saulsbury Industries will perform construction and the pipeline installation. |
Viridian Lithium - lithium refining and conversion project (France)
| ■ | Bankable Feasibility Study (BFS) contract for construction of the first lithium refining and conversion plant in Europe. Located in Lauterbourg, France, the plant will produce up to 100,000 tons of Battery Grade lithium chemicals per year – which is the equivalent capacity to power two million electric vehicles – to enable a secure and sustainable battery supply chain for the transition to electric mobility. The contract consists of a BFS and preferential rights on the construction of the plant and its three foreseen extensions. |
Strategic collaboration with Equinor to accelerate floating offshore wind development
| ■ | The two companies aim to develop floating wind steel SEMI substructures that accelerates technology development for floating offshore wind, ensures cost reductions and develops local value opportunities. The collaboration builds on the two companies’ joint ambition to drive industrialization of floating offshore wind. By teaming up at an early design phase of a floating wind farm project, the two parties seek to unlock value from integration and maximum use of fabrication capacities. |
Commercial launch of GO.H2 by T.EN™ – a full suite of flexible solutions for offshore green hydrogen production
| ■ | This suite of solutions – based on renewable power sources such as wind and solar – is flexible with building blocks tailored to meet clients’ needs depending on substructures, hydrogen products and derivatives produced, functionality and locations. The offshore facility can be a fixed structure or a floater. The green hydrogen is produced using a sea water desalination unit, followed by electrolysis and exported to shore by a transport pipeline or offloaded on a carrier vessel. For harsher environments, the substructure can be a spar or a semi-submersible. For high capacities and further from shore, the hydrogen is converted by adding an ammonia or a Liquid Organic Hydrogen Carrier (LOHC) unit and transferred to a floating storage and offloading vessel. By adding hydrogen storage and fuel cells, the facility ensures a stable and continuous power supply for electrified oil and gas facilities powered by wind turbines. For smaller capacities, the systems can be located on the floating offshore wind substructure or on the substation. Intermittency management is addressed from design phase through adequate system architecture and technology bricks, power and hydrogen storage and control strategies. In operations, an energy management system (EMS) enables online production optimization through predictive control models. |
Joint development and collaboration agreement with Alterra Energy to jointly develop sustainable plastics projects
| ■ | Agreement to integrate Alterra’s commercially available liquefaction process technology with Technip Energies’ pyrolysis oil purification technology to maximize adoption of recycled feedstock and improve circular economy solutions for the global petrochemical industry. The combination of advanced recycling and purification technologies enable more efficient processing and reuse of hard-to-recycle plastic. Alterra provides an innovative, patented, thermochemical liquefaction, converting hard-to-recycle plastic into pyrolysis based oil (“PyOil”). Technip Energies brings extensive knowledge of ethylene furnace and steam cracker design, preparation and purification of heavy feedstocks for refining and petrochemical facilities, all of which is combined in their Pure.rOil™ purification technology ensuring safe, reliable and an optimized integration with individual crackers. The combination of both companies’ solutions ensures Alterra’s recycled PyOil is drop-in ready feedstock to further accelerate the replacement of hydrocarbon-based oil with recycled feedstock in the production of new plastic-based materials. |
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Corporate and Other items
Corporate costs, excluding non-recurring items, were €22.9 million for the first half 2022. This included a positive foreign exchange impact of €0.3 million. This compare with corporate costs of €17.6 million in the prior year period.
Non-recurring expense amounted to €1.9 million mainly related to impairment on leased offices and restructuring charges.
Net financial expense was €9.7 million, impacted by the mark-to-market valuation of investments in traded securities and, to a lesser extent, interest expenses associated with the senior unsecured notes, partially offset by interest income from cash on deposit.
Effective tax rate on an Adjusted IFRS basis was 30.7% for the first half 2022, in line with the financial framework provided for full year 2022.
Depreciation and amortization expense was €50.9 million, of which €32.4 million is related to IFRS 16.
Adjusted net cash at June 30, 2022 was €3.2 billion, which compares to Adjusted net cash at December 31, 2021 of €3.1 billion.
Free cash flow of €109.6 million for the first half of 2022. Free cash flow, excluding the working capital variance of €51.4 million, was €161.0 million benefiting from strong operational performance and consistently high conversion from Adjusted Recurring EBIT. Free cash flow is stated after capital expenditures, net, of €17.4 million. Adjusted operating cash flow was €127.0 million.
Liquidity and credit rating information
Adjusted liquidity of €4.6 billion at June 30, 2022 comprised of €3.9 billion of cash and €750 million of liquidity provided by the Company’s undrawn revolving credit facility, which is available for general use and serves as a backstop for the Company’s commercial paper program, offset by €70.0 million of outstanding commercial paper.
Shareholder update
As of March 31, 2022, TechnipFMC retained 2.2% ownership of Technip Energies’ issued and outstanding share capital. In April 2022, TechnipFMC sold the remaining 4 million Technip Energies shares. TechnipFMC has now fully exited its position in Technip Energies.
Share repurchase
In the six months to June 30, 2022, the Company has repurchased 3,504,715 of its own stock, for a cash cost of €41 million.
This includes 1,800,000 shares acquired from TechnipFMC on January 14, 2022, as well as 1,496,892 shares purchased as part of the share buy-back program announced on March 22, 2022. It also includes 207,823 shares as part of the liquidity agreement to enhance the liquidity of Technip Energies’ shares.
AGM and Dividend
At the company’s maiden AGM on May 5, 2022, all resolutions submitted to the shareholders for approval at the 2022 Annual General Meeting of Shareholders (“AGM”) were adopted.
All resolutions on the Agenda received a majority of votes in favor including shareholder approval for the 2021 financial statements and the proposed dividend of €0.45 per outstanding common share for the 2021 financial year. The voting results are available at https://investors.technipenergies.com/news-events/agm.
Payment for the cash dividend took place on May 20, 2022.
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| 1.3. | PRINCIPAL RISKS AND UNCERTAINTIES |
RUSSIA
As of June 30, 2022, the Company is in the process of implementing an orderly exit of the Arctic LNG project as explained in the Chief Executive Officer’s quote in the press release for the half year results set forth in Section 1.2 of this Interim Management Report. For the accounting implications of Ukraine’s invasion by Russia, please refer to Note 2.2b. Conflict in Ukraine, of the condensed consolidated financial statements for the half-year ended June 30, 2022.
PRICE VOLATILITY AND
REDUCED MATERIAL AVAILABILITY
The Company will continue to monitor the impact resulting from variations in raw materials and labor costs due to resource shortages, reductions in production capacity and major logistical bottlenecks caused by the re-start of activities following the COVID-19 pandemic which have been further affected by the invasion of Ukraine by Russia and related sanctions.
In the second half of 2022, securing access to key raw materials, notably nickel and copper, as well as semi-conductors will be key. A possible shortage in energy availability may add to instability in the markets and impact production costs (in particular in manufacturing dependent on high energy input) and other costs (including labor).
In this environment, the ability of the Company’s to extend tendering proposals may require additional efforts to mitigate the gap between the terms of the bids to be extended by the Company to its clients and its ability to secure committed project inputs. Contractual provisions including contractual mechanisms which provide for reimbursable or adjustable prices may provide the Company with some protection to the extent it can negotiate these.
As relates to project bids that have already been submitted, the Company may be adversely impacted due to the risk of delays in the delivery of materials and equipment ordered as well as price increases for which it has not secured contractual protection at the ordering phase. In the event that it had secured contractual provisions for price increases or delay in delivery, the Company’s suppliers may nonetheless face unsustainable price increases putting at risk option validity or even purchase order completion at the agreed contractual value. Deliveries longer than those agreed during the tendering phase may also impact a project’s schedule and profitability.
Worldwide transportation constraints and increased shipping costs are also impacting project execution. The Company is adapting its shipping strategy including by seeking to charter vessels on a long term basis to be more pro-active in managing delivery schedules. A dedicated department has been created for such purpose.
The Company is also taking a number of measures, including seeking to identify equipment for which a possible pre-commitment agreement may be entered into to lock in prices to minimize the effects of the volatility, diversifying the Company’s supplier base including by identifying new alternative suppliers (and sub-suppliers as needed), reviewing contractual clauses to be included at the contract negotiation phase, increasing the monitoring of suppliers’
execution in particular at sub-order level, monitoring suppliers’ financial wherewithal, and monitoring price evolution to select the best timing to award (considering always any impact on project schedule). The Company will also assesses the risk of cost and schedule impact at the time it makes a decision to proceed to contract award.
COVID-19
While the situation in Europe has improved for now with respect to the COVID-19 pandemic, it remains a source of continuing restrictions in many parts of the world in which the Company operates. This has had operational impacts for the Company including in supply chain disruptions, productivity declines and logistics constraints as indicated above.
ENERGY SHORTAGE
As a result of the invasion of Ukraine by Russia, the supply of Russian oil and gas to Western European countries has been increasingly constrained, with very material price increases and possible severe impacts on electricity generation during the 2022-2023 winter. Should this result in material electricity shortages in Europe, governments may need to consider rationing measures. Though the Company has limited manufacturing facilities which would be affected by energy rationing (its T.EN Loading Systems, Cybernetix and CyXplus facilities in France), energy shortages could give rise to business continuity issues (both at manufacturing sites and at offices). An analysis of energy consumption and space occupancy will be carried out in response of this risk.
FINANCE RISK
Please refer to Note 20.2. Derivative financial instruments, for a description of the derivative instruments the Company enters into to hedge financial risk, and to Note 22. Market related exposure, for a discussion of certain financial risks the Company may be subject to.
LEGAL PROCEEDINGS
Please refer to Notes 23.2. Contingent liabilities associated with legal matters of the condensed consolidated financial statements for the half-year ended June 30, 2022, for a description of proceedings to which the Company is subject.
OTHER RISKS
Please also refer to Chapter 4, Risk and Risk Management, to section 3.2.2., ESG Risk Management, and to Section 2.6., Operating and financial review, of the Company’s 2021 Annual Report for a description of other risks the Group could be facing in the second half of 2022.
Please carefully consider the specific risks and uncertainties set forth above and the other information contained within this Interim Management Report as these are important factors that could cause the Company’s actual results, performance or achievements to differ materially from the Company’s expected or historical results.
| HALF-YEAR REPORT ● 2022 ● TECHNIP ENERGIES | 11 |
 | 2022 INTERIM MANAGEMENT REPORT 2022 HALF-YEAR RESULTS |
| 1.4. | RELATED PARTY TRANSACTIONS |
Related party transactions are identified and described in Note 21 of the condensed consolidated financial statements for the half-year ended June 30, 2022.
| 1.5. | FORWARD LOOKING STATEMENTS |
This Interim Management Report contains forward-looking statements that reflect the Company’s intentions, beliefs or current expectations and projections about the Company’s future results of operations, financial condition, liquidity, performance, prospects, anticipated growth, strategies and opportunities and the markets in which the Company operates. Forward-looking statements usually relate to future events and anticipated revenues, earnings, cash flows or other aspects of the Company’s operations or operating results. Forward-looking statements are often identified by the words “believe”, “expect”, “anticipate”, “plan”, “intend”, “foresee”, “should”, “would”, “could”, “may”, “estimate”, “outlook”, and similar expressions including the negative thereof. The absence of these words, however, does not mean that the statements are not forward-looking. These forward-looking statements are based on the Company’s current expectations, beliefs and assumptions concerning future developments and business conditions and their potential effect on the Company.
While the Company believes that these forward-looking statements are reasonable as and when made, there can be no assurance that future developments affecting the Company will be those that the Company anticipates.
All of the Company’s forward-looking statements involve risks and uncertainties (some of which are significant or beyond the Company’s control, such as Russia’s invasion of Ukraine, the associated sanctions and the impact these will have on our and/or our customers’ activities conducted in or related to Russia) and assumptions that could cause actual results to differ materially from the Company’s historical
experience and the Company’s present expectations or projections.
Should one or more of these risks or uncertainties materialize, or should underlying assumptions prove incorrect, actual results may vary materially from those set forth in the forward-looking statements.
Some of these factors are discussed in this Interim Management Report and in particular in Section 1.3., Principal Risks and Uncertainties. Risks are also discussed in the Company’s 2021 Annual Report at chapter 4, Risk and Risk Management, at section 3.2.2., ESG Risk Management, and at Section 2.6., Operating and financial review. These provide a discussion of the factors that could affect the Company’s future performance and the markets in which the Company operates. In light of the possible changes to the Company’s beliefs, assumptions and expectations, the forward-looking events described in this Interim Management Report may not occur.
Additional risks currently not known to the Company or that the Company has not considered material as of the date of this Interim Management Report could also cause the forward-looking events discussed in this Interim Management Report not to occur. Forward-looking statements involve inherent risks and uncertainties and speak only as of the date they are made. The Company undertakes no duty to and will not necessarily update any of the forward-looking statements in light of new information or future events, except to the extent required by applicable law.
| 12 | TECHNIP ENERGIES ● 2022 ● HALF-YEAR REPORT |
On behalf of the Board of Directors, I hereby declare that to the best of our knowledge:
| ■ | The condensed consolidated financial statements for the half-year ended June 30, 2022 have been prepared in accordance with the applicable set of accounting standards and give a true and fair view of the assets, liabilities, financial position and results of Technip Energies and of entities included in the consolidation; and |
| ■ | The 2022 interim management report describes the material events that occurred in the first six months of the year and their impact on accounts, together with the main related-party transactions and a description of the main risks and uncertainties for the remaining six months of the year. |
Nanterre, July 28, 2022
Arnaud Pieton
Chief Executive Officer
| HALF-YEAR REPORT ● 2022 ● TECHNIP ENERGIES | 13 |
3.1. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS FOR THE HALF-YEAR ENDED JUNE 30, 2022
The condensed consolidated financial statements included in this half-year report have not been subject to an external audit by the external auditor.
| 3.1.1. | CONDENSED CONSOLIDATED STATEMENT OF INCOME (UNAUDITED) |
| (In millions of €) | Note | June 30, 2022 | June 30, 2021 |
| Revenue | 6 | 3,216.7 | 3,118.1 |
| Costs and expenses | |||
| Cost of sales | (2,774.2) | (2,665.4) | |
| Selling, general and administrative expense | (160.0) | (149.2) | |
| Research and development expense | (22.1) | (17.4) | |
| Impairment, restructuring and other income (expense) | 7 | (1.9) | (30.6) |
| Other income (expense), net | 8 | 1.0 | 4.5 |
| Operating profit (loss) | 259.5 | 260.0 | |
| Share of profit (loss) of equity-accounted investees | 10 | 10.1 | 3.9 |
| Profit (loss) before financial expense, net and income tax | 269.6 | 263.9 | |
| Financial income | 11 | 8.6 | 7.4 |
| Financial expense | 11 | (94.0) | (91.2) |
| Profit (loss) before income tax | 184.2 | 180.1 | |
| Income tax (expense)/profit | 12 | (62.8) | (60.7) |
| Net profit (loss) | 121.4 | 119.4 | |
| Net (profit) loss attributable to non-controlling interests | (2.1) | (7.0) | |
| NET PROFIT (LOSS) ATTRIBUTABLE TO TECHNIP ENERGIES GROUP | 119.3 | 112.4 | |
EARNINGS (LOSS) PER SHARE ATTRIBUTABLE TO TECHNIP ENERGIES (1)
| Basic | €0.68 | €0.63 |
| Diluted | €0.67 | €0.62 |
(1) | For June 30, 2022, basic earnings per share has been calculated using the weighted average number of outstanding shares of 175,916,438 and diluted earnings per share has been calculated using the weighted average number of 178,514,257. For June 30, 2021, basic earnings per share has been calculated using the weighted average number of outstanding shares of 179,245,810 and diluted earnings per share has been calculated using the weighted average number of 181,908,563. |
| 14 | TECHNIP ENERGIES ⚫ 2022 ⚫ HALF-YEAR REPORT |
CONDENSED CONSOLIDATED FINANCIAL STATEMENTS CONDENSED CONSOLIDATED FINANCIAL STATEMENTS FOR THE HALF-YEAR ENDED JUNE 30, 2022 |  |
| 3.1.2. | CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME (UNAUDITED) |
| (In millions of €) | June 30, 2022 | June 30, 2021 |
| Net profit (loss) | 121.4 | 119.4 |
| Foreign currency translation differences | 53.8 | 20.7 |
| Reclassification adjustment for net gains included in net profit (loss) | 0.4 | — |
| Cash-flow hedge | (53.0) | (28.0) |
| Income tax effect | 5.8 | 4.6 |
| Other comprehensive income (loss) to be reclassified to statement of income in subsequent years | 7.0 | (2.7) |
| Actuarial gains (losses) on defined benefit plans | 0.1 | 0.1 |
| Income tax effect | — | — |
| Other comprehensive income (loss) not being reclassified to statement of income in subsequent years | 0.1 | 0.1 |
| Other comprehensive income (loss), net of tax | 7.1 | (2.6) |
| Comprehensive income (loss) | 128.5 | 116.8 |
| Comprehensive (income) loss attributable to non-controlling interests | 0.1 | (7.8) |
| COMPREHENSIVE INCOME (LOSS) ATTRIBUTABLE TO TECHNIP ENERGIES GROUP | 128.6 | 109.0 |
| HALF-YEAR REPORT ⚫ 2022 ⚫ TECHNIP ENERGIES | 15 |
 | CONDENSED CONSOLIDATED FINANCIAL STATEMENTS CONDENSED CONSOLIDATED FINANCIAL STATEMENTS FOR THE HALF-YEAR ENDED JUNE 30, 2022 |
| 3.1.3. | CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION (UNAUDITED) |
| (In millions of €) | Note | June 30, 2022 | December 31, 2021 |
| ASSETS | |||
| Goodwill | 13 | 2,102.3 | 2,074.4 |
| Intangible assets, net | 13 | 87.0 | 97.8 |
| Property, plant and equipment, net | 111.0 | 114.6 | |
| Right-of-use assets | 14 | 236.2 | 251.9 |
| Equity accounted investees | 10 | 85.2 | 75.4 |
| Deferred income taxes | 155.1 | 178.0 | |
| Other non-current financial assets | 15 | 86.0 | 66.2 |
| Total non-current assets | 2,862.8 | 2,858.3 | |
| Trade receivables, net | 858.4 | 1,038.4 | |
| Contract assets | 6 | 468.3 | 331.8 |
| Income taxes receivable | 92.5 | 55.5 | |
| Advances paid to suppliers | 259.2 | 154.5 | |
| Other current assets | 15 | 305.9 | 302.2 |
| Cash and cash equivalents | 16 | 3,668.9 | 3,638.6 |
| Total current assets | 5,653.2 | 5,521.0 | |
| TOTAL ASSETS | 8,516.0 | 8,379.3 | |
EQUITY AND LIABILITIES
| Issued capital | 1.8 | 1.8 | |
| Additional paid-in capital | 941.6 | 941.6 | |
| Treasury shares | (55.6) | (22.5) | |
| Invested equity and retained earnings | 697.3 | 655.1 | |
| Accumulated other comprehensive income (loss) | (90.5) | (99.8) | |
| Equity attributable to Technip Energies Group | 1,494.6 | 1,476.2 | |
| Non-controlling interests | 18.1 | 30.2 | |
| Total equity | | 1,512.7 | 1,506.4 |
| Long-term debt, less current portion | 18 | 594.9 | 594.1 |
| Lease liability | 14 | 221.6 | 236.9 |
| Deferred income taxes | 9.6 | 13.0 | |
| Accrued pension and other post-retirement benefits, less current portion | 127.6 | 127.7 | |
| Non-current provisions | 56.5 | 60.7 | |
| Other non-current financial liabilities | 17 | 60.5 | 64.2 |
| Total non-current liabilities | 1,070.7 | 1,096.6 | |
| Short-term debt | 18 | 99.4 | 89.2 |
| Lease liability | 14 | 70.4 | 68.9 |
| Accounts payable, trade | 1,650.4 | 1,497.1 | |
| Contract liabilities | 6 | 3,117.3 | 3,206.5 |
| Accrued payroll | 191.3 | 232.3 | |
| Income taxes payable | 65.2 | 80.8 | |
| Current provisions | 119.4 | 90.5 | |
| Other current liabilities | 17 | 619.2 | 511.0 |
| Total current liabilities | 5,932.6 | 5,776.3 | |
| Total liabilities | 7,003.3 | 6,872.9 | |
| TOTAL EQUITY AND LIABILITIES | 8,516.0 | 8,379.3 | |
| 16 | TECHNIP ENERGIES ⚫ 2022 ⚫ HALF-YEAR REPORT |
CONDENSED CONSOLIDATED FINANCIAL STATEMENTS CONDENSED CONSOLIDATED FINANCIAL STATEMENTS FOR THE HALF-YEAR ENDED JUNE 30, 2022 | |
| 3.1.4. | CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS (UNAUDITED) |
| (In millions of €) | Note | June 30, 2022 | June 30, 2021 |
| CASH PROVIDED (REQUIRED) BY OPERATING ACTIVITIES | |||
| Net profit (loss) | 121.4 | 119.4 | |
| Adjustments to reconcile net profit to cash provided (required) by operating activities | |||
| Depreciation and amortization | 69.2 | 59.8 | |
| Employee benefit plan and share-based compensation | 9 | 7.3 | 14.6 |
| Tax expense | 12 | 62.8 | 60.7 |
| Net finance costs | 11 | 85.4 | 83.8 |
| Impairments | 7 | 5.8 | — |
| Share of profit (loss) of equity-accounted investees, net of dividends received | 10 | 8.1 | (3.9) |
| Other | 11.0 | (1.8) | |
| Income tax paid | (87.9) | (43.7) | |
| Interest paid | (9.9) | (5.7) | |
| Changes in operating assets and liabilities | |||
| Trade receivables, net | (99.8) | (166.2) | |
| Contract assets | 6 | (93.4) | 10.1 |
| Inventories, net | (3.1) | (1.0) | |
| Accounts payable, trade | 113.3 | 101.6 | |
| Contract liabilities | 6 | 78.3 | 66.1 |
| Other current assets and liabilities, net | 15, 17 | (72.7) | 77.6 |
| Change in working capital | (77.4) | 88.2 | |
| Other non-current assets and liabilities, net | 15, 17 | (6.1) | (23.3) |
| Cash provided by operating activities | 189.7 | 348.1 | |
CASH PROVIDED (REQUIRED) BY INVESTING ACTIVITIES
| Capital expenditures | (17.4) | (15.3) | |||
| Acquisition costs of subsidiary, net of cash acquired | 4 | — | (2.0) | ||
| Proceeds from sale of assets | 0.1 | — | |||
| Other financial assets | (8.0) | (1.6) | |||
| Cash required by investing activities | (25.3) | (18.9) | |||
CASH PROVIDED (REQUIRED) BY FINANCING ACTIVITIES
| Net increase (repayment) in long-term and short-term debt | 18 | 22.0 | 587.2 |
| Net decrease in commercial paper | 18 | (10.0) | (313.0) |
| Purchase of treasury stock | 19 | (40.4) | (20.0) |
| Liquidity contract | 19 | (0.3) | — |
| Dividends paid to Shareholders | (79.0) | — | |
| Dividends paid to non-controlling interests | (11.4) | — | |
| Settlements of mandatorily redeemable financial liability | 20 | (120.2) | (129.0) |
| Payments for the principal portion of lease liabilities | (37.1) | (40.9) | |
| Net proceeds from (repayment of) loans from TechnipFMC | — | 54.5 | |
| Net (distributions to)/contributions from TechnipFMC | — | (532.9) | |
| Cash provided (required) by financing activities | (276.4) | (394.1) | |
| Effect of changes in foreign exchange rates on cash and cash equivalents | 142.3 | 37.3 | |
| (Decrease) Increase in cash and cash equivalents | 30.3 | (27.6) | |
| Cash and cash equivalents, beginning of period | 3,638.6 | 3,189.7 | |
| CASH AND CASH EQUIVALENTS, END OF PERIOD | 3,668.9 | 3,162.1 | |
| HALF-YEAR REPORT ⚫ 2022 ⚫ TECHNIP ENERGIES | 17 |
| CONDENSED CONSOLIDATED FINANCIAL STATEMENTS CONDENSED CONSOLIDATED FINANCIAL STATEMENTS FOR THE HALF-YEAR ENDED JUNE 30, 2022 |
| 3.1.5. | CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY (UNAUDITED) |
(In millions of €) | Issued | Additional | Treasury | Invested equity and retained earnings | Accumulated | Equity attributable to Technip Energies | Non- | Total |
| Balance as of December 31, 2020 | — | — | — | 1,993.9 | (184.1) | 1,809.8 | 16.0 | 1,825.8 |
| Net profit (loss) | — | — | — | 112.4 | — | 112.4 | 7.0 | 119.4 |
| Other comprehensive income (loss) | — | — | — | — | (3.4) | (3.4) | 0.8 | (2.6) |
| Net (distributions to)/ contributions from TechnipFMC | 1.8 | 952.1 | — | (1,513.6) | (4.1) | (563.8) | 1.8 | (562.0) |
| Share-based compensation | — | — | — | 8.8 | — | 8.8 | — | 8.8 |
| Treasury shares | — | — | (20.0) | — | — | (20.0) | — | (20.0) |
| Other | — | — | — | (1.0) | — | (1.0) | (0.6) | (1.6) |
| BALANCE AS OF JUNE 30, 2021 | 1.8 | 952.1 | (20.0) | 600.5 | (191.6) | 1,342.8 | 25.0 | 1,367.8 |
(In millions of €) | Issued | Additional | Treasury | Invested and retained | Accumulated | Equity attributable to Technip Energies | Non- | Total |
| Balance as of December 31, 2021 | 1.8 | 941.6 | (22.5) | 655.1 | (99.8) | 1,476.2 | 30.2 | 1,506.4 |
| Net profit (loss) | — | — | — | 119.3 | — | 119.3 | 2.1 | 121.4 |
| Other comprehensive income (loss) | — | — | — | — | 9.3 | 9.3 | (2.2) | 7.1 |
| Dividends | — | — | — | (79.0) | — | (79.0) | (11.4) | (90.4) |
| Share-based compensation | — | — | — | 8.1 | — | 8.1 | — | 8.1 |
| Treasury shares | — | — | (33.1) | (7.2) | — | (40.3) | — | (40.3) |
| Other | — | — | — | 1.0 | — | 1.0 | (0.6) | 0.4 |
| BALANCE AS OF JUNE 30, 2022 | 1.8 | 941.6 | (55.6) | 697.3 | (90.5) | 1,494.6 | 18.1 | 1,512.7 |
| 18 | TECHNIP ENERGIES ⚫ 2022 ⚫ HALF-YEAR REPORT |
CONDENSED CONSOLIDATED FINANCIAL STATEMENTS CONDENSED CONSOLIDATED FINANCIAL STATEMENTS FOR THE HALF-YEAR ENDED JUNE 30, 2022 | |
| 3.1.6. | NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) |
The accompanying notes are an integral part of the condensed consolidated financial statements.
As used herein, “Technip Energies Group”, “Technip Energies”, “the Group”, “the Company” or “us” refers to Technip Energies N.V. and all the companies included in the scope of consolidation. “Technip Energies N.V.” refers only to the parent company of the Group.
The condensed consolidated financial statements are presented in millions of euros, unless otherwise specified.
These condensed consolidated financial statements were prepared under the responsibility of and approved by the Board of Directors on July 26, 2022.
Technip Energies N.V. is a company with corporate seat in Amsterdam, the Netherlands, and principal place of business at 2126, boulevard de la Défense, CS 10266, 92741 Nanterre Cedex, France.
| HALF-YEAR REPORT ⚫ 2022 ⚫ TECHNIP ENERGIES | 19 |
| CONDENSED CONSOLIDATED FINANCIAL STATEMENTS CONDENSED CONSOLIDATED FINANCIAL STATEMENTS FOR THE HALF-YEAR ENDED JUNE 30, 2022 |
● Contents of notes
| Note 1. | Description of business | 21 |
| Note 2. | Summary of significant accounting policies | 21 |
| Note 3. | Seasonality | 23 |
| Note 4. | Changes in the scope of consolidation | 23 |
| Note 5. | Segment information | 23 |
| Note 6. | Revenue | 24 |
| Note 7. | Impairment, restructuring and other income (expense) | 26 |
| Note 8. | Other income and expense (net) | 26 |
| Note 9. | Share-based compensation | 26 |
| Note 10. | Investment in equity affiliates, joint ventures and other projects construction entities | 27 |
| Note 11. | Financial income (expense) | 29 |
| Note 12. | Income taxes | 29 |
| Note 13. | Goodwill and intangible assets | 29 |
| Note 14. | Leases | 30 |
| Note 15. | Other assets (non-current and current) | 30 |
| Note 16. | Cash and cash equivalents | 31 |
| Note 17. | Other liabilities (non-current and current) | 31 |
| Note 18. | Debt (long and short-term) | 32 |
| Note 19. | Shareholder’s equity | 33 |
| Note 20. | Financial instruments | 34 |
| Note 21. | Related party transactions | 37 |
| Note 22. | Market related exposure | 38 |
| Note 23. | Commitments and contingent liabilities | 39 |
| Note 24. | Subsequent events | 41 |
| Note 25. | Accounting policy news | 41 |
| 20 | TECHNIP ENERGIES ⚫ 2022 ⚫ HALF-YEAR REPORT |
CONDENSED CONSOLIDATED FINANCIAL STATEMENTS CONDENSED CONSOLIDATED FINANCIAL STATEMENTS FOR THE HALF-YEAR ENDED JUNE 30, 2022 |  |
Note 1. Description of business
As one of the largest engineering and technology (“E&T”) companies by revenue, the Technip Energies Group offers what it characterizes as a full range of design and project development services to its customers spanning the downstream value chain, from early engagement technical consulting through final acceptance testing.
The Group’s core purpose is to combine its E&T capabilities to bring forth new energy solutions and provide applications for the world’s energy transition.
The Group’s business focuses on the study, engineering, procurement, construction, and project management of the entire range of onshore and offshore facilities related to gas monetization, ethylene, hydrogen, refining, and chemical processing from biofuels and hydrocarbons. Technip Energies conducts large-scale, complex, and challenging projects often in environments with extreme climatic conditions. The Group relies on early engagement and front-end design as well as technological know-how for process design and engineering, either through the integration of technologies from its own proprietary technologies or through alliance partners. Technip Energies seeks to integrate and develop
advanced technologies and reinforce the Group’s project execution capabilities.
The Group also provides support services to other critical industries, such as life sciences, renewables, mining, and metal and nuclear.
The Technip Energies Group believes that it is differentiated from its competitors by its ability to offer clients a comprehensive portfolio of technologies, products, projects, and services. The Group’s capabilities span from feasibility studies, consulting services, process technology know-how, proprietary equipment, and project management to full engineering and construction. The Group’s expertise in integrating process technologies, either proprietary or from third-party licensors, fosters early project engagement, with a significant impact on project economics.
The Group partners with some of the world’s most well-known players in oil and gas for technologies, equipment, and construction worldwide. Additionally, the Group’s project management consulting services leverage its expertise in the management of complex projects to the benefit of its clients.
Note 2. Summary of significant accounting policies
| 2.1. | Basis of preparation |
The condensed consolidated financial statements were prepared in accordance with International Financial Reporting Standards (“IFRS”) as issued by the International Accounting Standards Board (“IASB”) and endorsed by the European Union (“UE”), in particular, for interim financial information according to IAS 34, Interim Financial Reporting (“IAS 34”).
The consolidation principles and accounting policies applied in the condensed financial statements for the six-month period ended June 30, 2022 and 2021 are in conformity with those we applied and detailed in the consolidated financial statements for the year ended December 31, 2021, except for specific requirements listed below:
| ■ | Employee benefits |
The amount of obligation corresponding to post-employment benefits and other long-term benefits as of June 30, 2022, is calculated by projecting the prior year obligation over one half-year, taking into account the benefits paid out.
| ■ | Income tax |
Income tax (current and deferred) is calculated by applying the estimated annual average tax rate for the current year, for each entity or tax group, to the consolidated Group’s profit before tax. Income tax on any material non-recurring items for the period is measured at the actual income tax rate applicable to the items concerned.
| 2.2. | Changes in accounting policies |
| a. | Use of critical accounting estimates, judgments and assumptions |
The preparation of condensed consolidated financial statements requires management to make certain estimates and assumptions, either at the balance sheet date or during the period that affects the reported amounts of assets and liabilities as well as expenses.
Refer to Note 1.7. “Use of critical accounting estimates, judgments and assumptions” in the Technip Energies Group consolidated financial statements for the year ended December 31, 2021, for a discussion of critical accounting estimates, judgments and assumptions. During the six-month period ended June 30, 2022, there were no changes to identified critical accounting estimates, judgments and assumptions.
| b. | Conflict in Ukraine |
The conflict in Ukraine and the sanctions imposed against Russia and Belarus pose significant challenges to business activities and introduce a degree of uncertainty on the expected development of such activities. The Group has considered its direct and indirect risk exposure resulting from the conflict in the preparation of its financial statements for the half-year and its assessment is discussed below.
Impairment of non-financial assets
| ■ | Goodwill |
Goodwill and impairment of non-financial assets accounting principles described in section 9.1.6. Notes to consolidated financial statements - Note 1. Accounting principles, in the Annual Report remain applicable as of June 30, 2022.
| HALF-YEAR REPORT ● 2022 ● TECHNIP ENERGIES | 21 |
 | CONDENSED CONSOLIDATED FINANCIAL STATEMENTS CONDENSED CONSOLIDATED FINANCIAL STATEMENTS FOR THE HALF-YEAR ENDED JUNE 30, 2022 |
In view of the significant developments as a result of the conflict in Ukraine, Technip Energies considered the impact of the conflict for the preparation of its interim financial statements. Considering the nature of the Group’s activities and its current portfolio, the conflict and accompanying packages of sanctions have consequences on the financial statements mainly arising from fluctuations in the foreign exchange rates, restrictions on operations, including possible disruption to the supply chain that impact product costs and cause delays or inability to source product for instance.
IAS 36, ‘Impairment of assets’, requires that management consider at each reporting date whether there is any indication that an asset may be impaired. The recoverable amount in the current uncertain environment requires a careful assessment of the cash-flow projections.
Considering the above, Technip Energies performed a goodwill impairment test at the level used to monitor goodwill for internal management purposes, which corresponds to the Technip Energies’ CGUs (Project Delivery and Technology, Products and Services).
Net cash-flows pertaining to Arctic LNG 2 project as well as new business opportunities in Russia have been excluded from the prospective financial information. To calculate future cash-flows, Technip Energies used estimates of economic and market assumptions that reflect expected global economic growth, technology efficiency, policy measures, consideration of investments (capital expenditures), cost of development and, as mentioned above, considered the conflict’s impacts and consequences. The assumptions also included estimates of future expected operating margins, tax rates, cash expenditures including those in connection with the Group’s energy transition objectives.
The valuation of CGUs for goodwill impairment testing purposes was based on the discounted cash-flow method, under the income approach. The income approach estimates the value in use by discounting each CGUs estimated future cash-flows using a weighted-average cost of capital that reflects current market conditions and the risk profile of the CGUs.
The following table presents the risk-adjusted post tax discount rate for both CGU:
June 30, 2022 | December 31, 2021 | |
| Project Delivery | 12.0% | 11.5% |
| Technology, Products & Services | 10.5% | 9.5% |
The excess of value in use over carrying amount was approximately €700.0 million and €625.0 million for Project Delivery and Technology, Products and Services, respectively.
As such, the Group’s impairment test performed on goodwill did not lead to impairment. The Group also performed sensitivity analysis during this exercise. Considering a 1.0% increase of the discount rate and a 1.0% decrease of the long-term growth rate, the excess of value in use over carrying amount was approximately €568.0 million for Project Delivery and €443.0 million for Technology, Products and Services.
The conclusion of the Group’s impairment test campaign remains unchanged after allocation of corporate assets.
The following table is the carrying amount of goodwill allocated by CGU:
(In millions of €) | June 30, 2022 | December 31, 2021 |
| Project Delivery | 1,543.7 | 1,542.8 |
| Technology, Products & Services | 558.6 | 531.6 |
| TOTAL | 2,102.3 | 2,074.4 |
During the six-month period ended June 30, 2022 and the year ended December 31, 2021, the Technip Energies Group did not record any goodwill impairment expenses.
Excluding goodwill, the Group does not hold significant non-financial assets located in Russia or that would directly or indirectly be impacted by the conflict. It has therefore not recorded any impairment as of June 30, 2022 on property plant and equipment, right-of-use or intangible assets.
Impairment of financial instruments and other financial risks
| ■ | Expected credit loss |
In assessing impairment of financial instruments, the Group considered the potential effects of the conflict in Ukraine on the measurement of its weighted average expected credit loss rate. The analysis of the increase of the credit risk on financial instruments has been performed on a collective basis, during which we have asked the Group entities to identify counterparties which are Russian or have links with Russia. By adopting this “ad hoc” approach, Technip Energies concluded that there is no impact on the rate used to measure the expected credit loss at Group level. The Arctic LNG 2 project is in a positive cash-flow position and as of June 30, 2022, balance sheet positions of the Arctic LNG 2 project reflect the Group’s assessment of its exposure and level of collectability.
Excluding Arctic LNG 2, the Group’s positions with Russian external third parties are not material, and the collection of receivables is considered highly probable.
| ■ | Liquidity and currency risk |
Further to the conflict in Ukraine and the consecutive sets of sanctions and counter sanctions which have been enacted by, amongst others the EU, USA authorities and the Central Bank of Russia, the Group is monitoring financials risks to which it may be exposed such as credit risk, liquidity risk and currency risk. We can report that we no longer have any foreign exchange coverages related to Rubles in our books, nor any debit situation with our Treasury Center. The cash position held by Russian subsidiaries is not material at Group level, and no loan is in place to Russian entities or other Russian parties. It shall be noted that Technip Energies does not hold significant balances of cash positions in Rubles or located in Russia (cash and cash equivalent by currency provided in Note 16.).
Revenue from Contracts with Customers
The Group evaluated the potential implications of the Ukraine conflict on revenue recognition for the six-month period ended June 30, 2022 and concluded that current developments did not affect its ability to recognize revenue nor the measurement of variable considerations over the first six months of the year.
The analysis performed confirms that the criteria to recognize revenue are met. To date, the Group considers that any outstanding consideration due is collectible on the project.
| 22 | TECHNIP ENERGIES ● 2022 ● HALF-YEAR REPORT |
CONDENSED CONSOLIDATED FINANCIAL STATEMENTS CONDENSED CONSOLIDATED FINANCIAL STATEMENTS FOR THE HALF-YEAR ENDED JUNE 30, 2022 | |
Although the Group’s revenue will be affected by the inability to pursue its operations in Russia due to the sanctions associated to the Ukraine conflict, suspension and termination of the Arctic LNG 2 contract would not give rise to variable considerations arising out of contractual penalties, liquidated damages, or price concessions that could be granted to the Arctic LNG 2 customer.
There are no refund liabilities, termination penalties or other contractual liability that would not already have materialized in the balance sheet positions of the Arctic LNG 2 contract.
The Group did not identify significant additional costs to be incurred to satisfy its performance obligation under the Arctic LNG 2 contract that would need to be included in the cost-to-cost input method for measuring progress and revenue recognition.
Material judgements and estimates
| ■ | Judgement |
In the context of the geopolitical uncertainty arising from the conflict in Ukraine, the Group’s management applied judgement in revenue recognition notably on Arctic LNG 2 and recognized revenue where it is authorized to do so, in compliance with applicable sanctions adopted by the European Union.
| ■ | Assumptions about the future and other sources of estimation uncertainty |
Material changes have been performed during the six-month period in the assumptions underlying the estimation of recoverable amounts of assets for impairment tests. This is described in detail in section “Impairment of non-financial assets”.
On the goodwill impairment test performed, Group estimates and assumptions used have excluded all flows from the Arctic LNG 2 project and did not consider any new business opportunities in Russia. The Group does not expect a significant likelihood that it would have to make a material adjustment to the carrying amounts of assets and liabilities within the next financial year.
Going concern
In the continuity of the assessment performed by the Group for its 2021 Annual Report and described in Note 2. Going concern, management has considered the potential implications of the measures taken in response to the conflict in Ukraine when assessing the Group’s ability to continue as a going concern. Although Technip Energies acknowledges that the current situation has introduced uncertainty in the conduct of businesses as well as global and wide potential impacts, management considers that the Company has sufficient resources to continue in operational existence for the foreseeable future and that there is no material uncertainty related to events or conditions that may cast significant doubt on the entity’s ability to continue as a going concern.
For this reason, Technip Energies continues to adopt the going concern basis in preparing the condensed consolidated financial statements.
Cyber impacts
As part of Technip Energies’ ongoing cybersecurity strategy, the Group undertakes regular reviews of external threats and evaluates them against its existing systems and processes. Given the situation, the Group increased its threat monitoring capabilities through a combination of additional technologies and services to mitigate any additional threats that are identified. These can be from several threats including nation states and political hacktivists. Technip Energies has also additionally increased the awareness of these threats to all its employees through a combination of additional awareness campaigns and supplemental training.
On April 1, 2022, the Group renewed its cyber insurance policy with Lloyd’s syndicates Brit and Kiln who, in the cover provided under this policy have expressly excluded:
| ■ | Any loss or damage or liability in or from any occurrence in Russia or their respective territorial waters. |
| ■ | Any loss or damage or liability incurred by persons or entities located in Russia or their respective territorial waters. |
Note 3. Seasonality
Technip Energies’ operations may be affected by variations from normal weather patterns, such as cooler or warmer summers and winters. Adverse weather conditions, such as hurricanes or extreme winter conditions, may interrupt or curtail the Group’s operations, or its customers’ operations, cause supply disruptions or loss of productivity and may
result in a loss of revenue or damage to equipment and facilities. This information is provided to allow for a better understanding of the results, however, management has concluded that this is not “highly seasonal” in accordance with IAS 34.
Note 4. Changes in the scope of consolidation
Half-year ended June 30, 2022
The Group did not have any significant acquisitions and divestitures during the six months ended June 30, 2022.
Half-year ended June 30, 2021
On April 27, 2021, the Technip Energies Group’s participation in Inocean AS was increased to 100% by acquiring the
remaining 49.0% of Inocean AS that the Group did not already own for €2.0 million. Inocean AS was already fully consolidated. The carrying amount of non-controlling interest, at the date of acquisition, was €0.5 million.
Note 5. Segment information
In the periods presented here, the Chief Executive Officer reviewed and evaluated the Technip Energies Group operating performance to make decisions about resources to
be allocated and has been identified as the Chief Operating Decision Maker (“CODM”). Utilizing the internal reporting information provided to the CODM, the Technip Energies
| HALF-YEAR REPORT ● 2022 ● TECHNIP ENERGIES | 23 |
| CONDENSED CONSOLIDATED FINANCIAL STATEMENTS CONDENSED CONSOLIDATED FINANCIAL STATEMENTS FOR THE HALF-YEAR ENDED JUNE 30, 2022 |
Group has changed, in 2021, the structure of its internal organization and defined two segments designated as Project Delivery and Technology, Products and Services. The assessment of the operating segment’s performance is based
on the Group’s EBIT. Statement of income information by segment is shown below:
(In millions of €) | June 30, 2022 | |||
Project | Technology, Products & Services | Corporate/ | Total | |
| Revenue | 2,574.8 | 641.9 | — | 3,216.7 |
| EBIT (PROFIT (LOSS) BEFORE FINANCIAL EXPENSES, NET AND INCOME TAX) | 233.5 | 59.4 | (23.3) | 269.6 |
| June 30, 2021 | ||||
(In millions of €) | Project | Technology, Products & Services | Corporate/ | Total |
| Revenue | 2,497.6 | 620.5 | — | 3,118.1 |
| EBIT (PROFIT (LOSS) BEFORE FINANCIAL EXPENSES, NET AND INCOME TAX) | 252.3 | 54.0 | (42.4) | 263.9 |
During the six months ended June 30, 2022 and 2021, revenue from Arctic LNG 2 and Yamal exceeded 10% of Technip Energies’ consolidated revenue. Revenue from North Field Expansion project also exceeded 10% of Technip
Statement of financial position information by segment is shown below:
Energies’ consolidated revenue during the six months ended June 30, 2022.