• In the first six months of the year and in recurrent terms, EBITDA growth stood at 6% to 2.11 billion and net profit grew by 22% to 532 million euros, both when compared with the same period last year.
  • The group has explained a negative EBITDA impact of over 100 million euros on non-recurring and extraordinary impacts when compared with the first half of 2017.
  • Company earnings have been marked by business growth in the Gas & Power Division and by stable progress by the gas and electricity distribution business in the main markets.
  • Trends in the American currencies against the Euro (the US Dollar, the Argentinian, Mexican and Chilean Pesos, and the Brazilian Real) have dragged down earnings with negative impacts of 106 million euros on the EBITDA and 25 million euros on net profit.
  • The exhaustive review of asset values undertaken as a result of updates to the main business hypotheses and forecasts, has led to an accounting adjustment of 4.85 billion euros, which significantly and extraordinarily impacts on the consolidated profit and loss account for the year.
  • The company has explained improving outlooks for the second half of the year, affected positively by the launch of the new efficiency programme under the Strategic Plan.
  • Naturgy underlined its message of commitment to investment discipline, with the application of demanding minimum profitability thresholds and risk assessment criteria that should guarantee value creation. Against this backdrop, it has been confirmed that 70% of the CAPEX made in the period was allocated to organic growth projects.
  • The new roadmap defined in the 2018-2022 Plan has been guaranteed by Standard & Poor’s, which has confirmed its long-term credit rating of BBB with a ‘stable’ outlook.

Naturgy will pay its first interim dividend under its 2018-2022 Strategic Plan for the 2018 financial year of 0.28 euros per share in cash on 31 July, only four weeks after presenting its new roadmap in London. This plan has been designed to create value and foster increased transparency, efficiency and simplicity, which will lead to increased value for shareholders.

The Chairman & CEO of Naturgy, Francisco Reynés, stressed that “with this first payment and the new Strategic Plan already in place, we seek to reaffirm the company’s commitment to attractive and sustainable remuneration for shareholders, as we announced a few weeks ago for the next five years. Furthermore, this is the first of a total three payments that we will make wholly in cash against this financial year”.

This first interim dividend follows the lines established by the new 2018-2022 Strategic Plan and is part of a total dividend of 1.30 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.

This shareholder remuneration is accompanied by a share buy-back programme of up to 2 billion euros in the period 2018-2022, which would only be suspended if an investment meeting the profitability criteria set by the company were to be found and positively assessed.

“The Strategic Plan seeks to strengthen investment discipline through certain profitability thresholds that can guarantee the creation of value and profitable growth. The most significant aspect of our strategic plan is that we are prioritising value creation over size”, said Francisco Reynés.

First half results

In the results presented by the company today, Naturgy posted a recurring net profit in the first half of the year of 532 million euros, 22% higher than in the same period last year. The recurring EBITDA also rose by 6% between January and June, to 2.11 billion euros. Exchange rate trends in this half of the year had a negative impact of 106 million on the EBITDA, affecting all currencies in which the power company operates.

Naturgy stressed that the agreement signed between Sonatrach and Naturgy for extending the Algerian gas purchase contracts until the end of the next decade, which will enable Naturgy to maintain a highly significant volume and guarantee optimum natural gas (NG) and liquefied natural gas (LNG) distribution in its supply mix, has not yet impacted on the income statement for this half of the year. However, it expects it will do so retrospectively from the start of this year in the accounts to be released at the close of the third quarter.

Furthermore, the first shipment of LNG under the long-term contract signed with the Russian company Yamal LNG was unloaded on 21 June. This contract expands the portfolio of strategic suppliers with which Naturgy does business and strengthens supply diversity in this region of Europe with the first long-term Russian LNG supply contract.

Asset value adjustment

Naturgy told the market that, in line with the new macroeconomic situation, the outlooks for the main indicators in the energy sector and the hypotheses considered in the plan, it has revised the value of its assets and undertaken a one-off accounting adjustment of 4.85 billion euros before tax.

This clean-up is wholly included in the January-June 2018 results in a non-recurring fashion under the headings of “Depreciation and fixed asset impairment losses” (4.28 billion) and “Results from entities valued using the equity method” (572 million) in the consolidated profit and loss account. Hence, the income attributable to the group in the first half of 2018 stand negative at -3.28 billion euros. This value adjustment has no impact whatsoever on shareholder remuneration for the period.

Improved efficiency and strengthened investment discipline

The Strategic Plan contains an efficiency programme that will be launched in the second half of the year. Furthermore, investment discipline is strengthened by applying certain minimum profitability thresholds for potential investments that guarantee the creation of value and profitable growth. In the first half of the year, 70% of the CAPEX invested was allocated to organic growth projects.

In the period January-June, Naturgy increased its focus on generating cash flow by improving recurrent earnings and disinvestments carried out during the first half of the year. Excluding one-off projects –mainly the incorporation of two methane tankers– investment rose by 4% in the first half of the year. Investment in property, plants and equipment and intangible assets amounted to 1.15 billion euros, of which 380 million correspond to the financial lease of two new methane tankers.

In this period, it is worth noting the acquisition of two solar power projects in Brazil, which represent an investment of some 95 million euros and a capacity of 83 MW. They are expected to enter operation in the fourth quarter of 2018.

Financial discipline and management

At 30 June 2018, the net financial debt of Naturgy stood at 12.36 billion euros, making the debt ratio 45%. Hence the net debt/EBITDA ratio and EBITDA/financial debt cost ratio stood at 3.2x and 7.3x at the close of the first half of the year.

On 18 July, Standard & Poor’s ratified the long-term credit rating (BBB) and stable outlook following presentation of the Strategic Plan.

Madrid, 26 July 2018

Consolidated balance account

(€ millions) 1H18 1H17
Net sales 12,176 11,569
Procurements -8,907 -8,263
Gross margin 3,269 3,306
Other operating revenue 104 128
Personnel expenses -464 -469
Taxes -237 -225
Other operating expenses -668 -710
EBITDA 2,004 2,030
Other revenue - -
Depreciation, amortisation and impairment losses -5,165 -800
Impairment owing to credit losses -63 -58
OPERATING INCOME  -3,224  1,172
Financial results -306 -349
Income from disposal of financial instruments - -
Result from entities using the equity method -559 7
EARNINGS BEFORE TAX  -4,089 830 
Tax on profits 926 -183
Income from interrupted operations -15 64
Non-controlling interests -103 -161
INCOME ATTRIBUTABLE TO THE GROUP -3,281 550

 

Contribution to EBITDA per business

(€ millions) 1H18 Recurring Non-recurring 1H18 1H17 Recurring Non-recurring 1H17
Gas & Electricity 639 -44 595 504 45 549
EMEA infrastructure 898 -7 891 893 -14 879
LatAm South infrastructures 400 -38 362 407 0 407
LatAm North infrastructures 122 2 123 139 0 139
Rest 47 -14 33 48 8 56
EBITDA 2,105 -101 2,004 1,991 39 2,030