By Lisa Jucca and Giancarlo Navach
MILAN (Reuters) - Saipem's
Saipem, 43-percent-owned by Italian oil company Eni
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.
"Many investors got back into Saipem after the first profit warning, thinking the worst was over, but they were burnt again this time around," a Milan-based trader said.
Saipem's former chief executive Pietro Franco Tali was ousted in December when news of the Algerian probe first emerged. One month later the new management triggered a 34-percent drop in its share price in a single day by slashing its profit forecast for 2013.
In April, at the behest of Italy's Consob market regulator, auditors of Saipem said they had found failings in the internal control system. Saipem has since said it is taking a more conservative approach in setting targets.
In its statement on Friday, Saipem said two problem contracts in Mexico and Canada would cost it 260 million euros, adding there were also some problems at its E&C Offshore business.
Saipem, now run by new chief executive Unberto Vergine, said on Friday it still expected a strong recovery in profits in 2014 and thereafter.
"Saipem's second-profit warning in six months increases the uncertainty, in our view, regarding the pace of earnings rebound and the likelihood of negative surprises," said analysts at Morgan Stanley.
(Reporting by Lisa Jucca and Stephen Jewkes; Editing by Greg Mahlich)