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Saipem Unexpectedly Cuts Dividend As Net Profit Drops 30%

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Italy's Saipem SpA Wednesday unexpectedly cut its 2012 dividend by 2.9% because of lower earnings, after the oil services company lost more than a third of its market capitalization last month when it slashed earnings guidance.

Saipem also said fourth-quarter net profit fell 30% on the year, more than expected, as the performance of its onshore engineering and construction operations worsened because of low-margin contracts signed in a highly competitive market.

The company said it plans to pay a dividend per share of 0.68 euro ($0.92) on 2012 earnings, down from EUR0.70 in the previous year.

Fourth-quarter net profit slipped to EUR180 million, from EUR258 million in the same period in 2011, while revenue rose 0.3% to EUR3.42 billion.

Operating profit fell 22% to EUR318 million over the period.

A survey of six analysts polled by Dow Jones Newswires had expected an average fourth-quarter net profit of EUR200.5 million on revenue of EUR3.28 billion, and an operating profit of EUR359.3 million. The dividend had been forecast at EUR0.70 a share.

Milan-based Saipem, which is controlled by oil company Eni SpA, has been in the spotlight in recent months after it announced in December that it was being investigated by Italian prosecutors over possible corruption involving some Algerian contracts. Saipem denied any wrongdoing.

Two weeks later, Saipem shocked investors by reducing 2012 earnings guidance and indicating a gloomy outlook for this year. The sudden change came after months of assurances that the company was optimistic over earnings.

Wednesday, the company confirmed 2013 guidance for a net profit of about EUR450 million, operating profit around EUR750 million and revenue of EUR13.5 billion. It said this will be a "significant" reduction on the year and it will be mainly from the engineering and construction sector.

On a positive note, Saipem said it expects the drilling sector to grow.

Copyright (c) 2012 Dow Jones & Company, Inc.

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