Naturgy improves its recurring revenue in the third quarter with a 10% EBITDA increase to 3.25 billion euros and a 38% net profit increase to 877 million euros
- The Board of Directors is approving a second interim dividend from the 2018 revenue of 0.45 euros per share, which will be paid out on 27 November.
- Comparable and recurring growth was driven by the activity of all Business Units, the EBITDA contribution from which rose by almost €500 million, excluding the negative impact from currency devaluation.
- The non-comparable accounting revenue is distorted by the impairment of assets accounted for at the close of the first half of the year, as well as by the efficiency capture costs and other non-recurring aspects occurring this year.
- The company is moving forward with its commitments in terms of its dividend policy: setting a total dividend of 1.3 euros per share drawn against the 2018 financial year, up 30% on 2017.
- Implementation of the 2018-2022 Strategic Plan (presented in June) is starting to produce results: on only three months, both the organisational structure and the corporate governance structure have been simplified; an asset review process has been conducted; two global committees have been set up (opex and capex) in order to further develop the efficiency plans; the group’s main supply contract with Sonatrach has been renewed; progress has been made on streamlining the capital structure with debt issues in local currency at the overseas subsidiaries; and new renewable power station contracts have been won in Australia and Spain.
- The group invested close on €1.6 billion in the period, of which more than 70% was allocated to organic growth projects and meets the group’s strict value creation criteria.
Naturgy posted a recurring EBITDA of 3.25 billion euros –10% higher than in the first nine months of last year– and a net profit in recurrent terms of 877 million euros, up 38%. These are the results achieved in the first three months following presentation of the new 2018-2022 Strategic Plan. The new plan is based on four key pillars for creating value: simplicity and accountability; optimisation and efficiency; investment discipline; and shareholder remuneration.
The company Chairman and CEO, Francisco Reynés, said that the third quarter is “the first following the launch of our Strategic Plan and the results support the executive team’s commitment to following that plan. Among other things, I would like to highlight our simplification of corporate governance and the business and corporation structure, the increased dividend for shareholders, the agreement reached with Sonatrach in Algeria, the launch of our efficiencies plan and the growth investments that have been finalised and meet our minimum profitability criteria. Naturgy is clearly focused on following the strategic lines of action presented to the market in June”.
In the last three months, the company has made progress in its strategic transformation. On the one hand, progress has been made in simplicity & accountability with management of the company via only four business areas, simplification of the steering committee and a reduction in the size of the Board of Directors from 17 to 12 members, among other aspects.
On the other hand, progress has also been made in optimisation and efficiency, the main milestones of which include the gas supply contract renewal agreements with Sonatrach in Algeria, by virtue of which the supply periods are extended to 2030 and greater supply security is achieved for the Spanish market. Another noteworthy milestone is the launch of the group’s efficiencies plan, which will contribute towards a significant reduction in operation costs for 2018. Two global committees have been set up for this purpose: Opex and Capex.
Furthermore, this period also saw the company make progress in capital structure optimisation, amortising all bank debt at a corporate level and rebuying more than €300 million of bonds, as well as issuing debt in local currency for those businesses that operate outside of the Eurozone.
In terms of investment discipline, it is worth noting that the group’s subsidiary GPG was awarded the contract for a new wind farm in Australia and that this will represent an investment of 166 million euros. The development will include 180 MW of power under a 15-year energy purchase agreement at a regulated tariff. The project is expected to make an EBITDA contribution of approximately 22 million euros per year once it is fully operational. Furthermore, Naturgy plans to grow its renewable capacity in Spain by more than 200 MW this year.
It is also worth noting the decision issued by ICSID this period on the Damietta Plant in Egypt ruling in favour of UFG (Unión Fenosa Gas), in which Naturgy is a 50% partner alongside Eni. The legal action responds to the lack of supply experienced by the Damietta Plant since 2012, forcing the facility to shut down.
In terms of another key aspect of the Strategic Plan –the commitment to shareholder remuneration– the company will pay a second interim dividend of €0.45/share drawn against the 2018 results on 27 November. In this way, Naturgy is ratifying its commitment to remunerate shareholders with a total dividend of 1.3 euros per share drawn against the 2018 financial year – up 30% on 2017. As from 2018, the company has committed to increasing this figure by at least 5% per year to reach 1.59 euros per share in 2022.
Naturgy invested 1.59 billion euros in the first nine months of the year – up 42% on the same period of 2017. Growth investments in the period accounted for more than 70% of this total, standing at 1.15 billion euros (up 97%). 440 million euros of maintenance investments.
Capital structure optimisation
At 30 September, Naturgy’s net financial debt stood at €13.58 billion – 10.4% less than that reported at year-end 2017. Hence, the Net Debt/EBITDA ratio stood at 3.4x at the close of the third quarter. This compares with 3.9x at year-end 2017, demonstrating the strengthened financial health of the company in the first nine months of the year.
Naturgy used part of its cash flow to amortise corporate bank debt in the third quarter, including 1.27 billion euros and 390 million dollars.
Furthermore, on 19 October, the company successfully completed a bond rebuy for 314 million euros, with maturity dates ranging between 2019 and 2021.
Naturgy is continuing its optimisation process by assigning the necessary financing to each business division needed to increase autonomy and enhance flexibility.
Results per business
In its results presented to the market today, Naturgy is showing significant growth in its businesses. This translates into a recurring EBITDA for the group of 3.25 billion (up 10%) and a recurring net profit of 877 million euros (up 38%).
At 30 September, the company posted consolidated accounting losses of 3.04 billion euros stemming from an asset value adjustment of 4.91 billion euros carried out in the first half of the year. This effect was already announced when the strategic plan was presented.
Exchange rate trends between January and September had a negative impact of 182 million on the EBITDA and affected all the currencies in which the company operates, especially the Argentine Peso but also the Brazilian Real, the Dollar and the Mexican and Chilean Pesos. The impact on net profit for the company was 80 million euros, especially from the Argentine Peso due to the hyperinflation affecting the economy in this country.
By business unit, all Gas&Power activities grew and it posted a recurring EBITDA of 1 billion euros. This was mainly due to the international business of GNL and gas commercialisation stemming from the renewal of the agreement with Sonatrach and improved commercialisation prices.
Business by Infraestructuras EMEA remained stable in the first nine months of the year, with a recurring EBITDA increase to 1.36 billion euros. The good performance by the electricity networks in Spain should be highlighted.
Results from the business by Infraestructuras América del Sur (Chile, Argentina and Brazil, mainly) was affected by the negative exchange rate trend with an impact of 132 million on the EBITDA, which fell to 656 million euros in recurrent terms.
As for Infraestructuras Norte Latinoamérica (Mexico and Panama), exchange rates had an impact of 16 million euros on the EBITDA, which stood at 193 million euros in recurrent terms.
Consolidated income statement
|Depreciation, amortisation and impairment losses||-5,537||-1,204||-||-1,204||-1,204||0%|
|Impairment owing to credit losses||-119||-99||20.2%||-107||-99||8.1%|
|Result using the equity method||-547||17||-||25||17||47.1%|
|Corporate income tax||858||-245||-||-323||-236||36.9%|
|Income from interrupted operations||-11||89||-||-||-||-|
Contribution to EBITDA per activity
|Gas & Electricity||935||723||29.3%||1,003||678||47.9%|
|LatAm South infrastructures||505||680||-25.7%||656||680||-3.5%|
|LatAm North infrastructures||194||207||-6.3%||193||207||-6.8%|