IBERDROLA EARNS €1 801 MILLION TO JUNE DESPITE SHARP DROP IN SPAIN
International business eanings rose 74% while results in Spain fell 44%, reaching just €430 million, less than 25% of total earnings
Ebitda rose 2% to €4,087 million
KEY ASPECTS
- Regulated business grew in Brazil (+36.1%), United Kingdom (+8.2%) and United States (+6.5%) and fell 12,6% in Spain, affected by March regulatory measures
- Ebitda from the liberalised business also fell in Spain (-10.3%) while that of the international business registered a strong increase
- By contrast, Ebitda increase from the renewables business is stronger in Spain than elsewhere
FINANCIAL STRENGTH
- Group liquidity stood at €9.5 billion at the end of the six month period
- Operating cash flow continued to rise, reaching €3.3 billion (+5.8%)
- The Company reduced its leverage to 46.1%, excluding the tariff deficit
- IBERDROLA plans to maintain its shareholder remuneration policy
IBERDROLA’s first half earnings were €1,800.5 million (+15.2%), with Ebitda up 2% at €4,086.8 million. These results reflect the important contribution of the company’s international business despite worsening conditions in Spain. All Group divisions have produced improved results, although liberalised and networks businesses in Spain have shown strong downward trends.
International business earnings rose 74% to €1,363 million, representing over 75% of the Group’s total. This has offset results in Spain which fell 44% to €438 million and now represent less than 25% of net profits.
In terms of Ebitda, the Group has also benefitted from the contribution of its international business which now stands for more than half the Group’s total. Whilst Ebitda outside Spain grew 13.4% to €2,168 million, in Spain it fell 8.3% to €1,919 million affected by recent regulatory measures and lower production.
Revenues in the period rose 9.3% to €16,992.6 million, while gross margin rose 3.2% to €6,309.2 million. The Group’s recurring profit (Ebit) rose 3.3% to 2,539.9 million, with operating cash flow improving 5.8% at €3,300 million.
By area, Ebitda from the regulated business rose 4.7% driven by international growth which offsets the fall in Spain where regulatory measures implemented on 30 March have caused a severe reduction in revenues. Ebitda from the regulated business grew in United Kingdom (+8.2%), United States (+6.5%) and Brazil (+36.1%), countries where it is considered an anticyclical activity that attracts investment, while in Spain it fell 12.6%.
The liberalised business was affected by results in Spain where it fell 10.3%, in contrast with the upward trend of international business. The industry in Spain is also anticipating a possible government announcement that will further impact the company’s results.
By contrast, Ebitda from the renewables business in Spain rose 23%, as opposed to a rise of just 3% outside Spain. The increase in Spain is in the main, a result of improved wind resource during the period.
Financial Strength
Despite the complex economic environment, IBERDROLA continued to place priority on maintaining solid finances. At the end of the second quarter, Group liquidity stood at €9,551 million, enough to meet financing needs for the next 24 months. Equity stood at €34,263 million.
Net adjusted debt for the Group – excluding the €2,710 million pending from repayment of the tariff deficit – stood at €29,318 million at the end of the period. The Group progressed in its attempt to reduce leverage which now stands at 46.1%, excluding the tariff deficit, as opposed to 46.4% in the same period last year. Also, the Company’s average debt maturity stands at 6.3 years.
This commitment to balance sheet strength has enabled IBERDROLA to maintain its key financial ratios, such as the funds from operations (FFO) to debt or retained cash flow (RCF) ratios, which are 21.3% and 17.4% respectively, excluding the tariff deficit.
Shareholder remuneration policy and prospects
In the coming years, IBERDROLA’s investment plan will be based on projects combining optimum levels of security, profitability and maturity period. Thus, the Group’s future development will originate from the regulated business.
Also, in the coming months the Company will continue its efforts of deleveraging and improving its financial ratios, through generating free cash flow, adapting investments, reducing expenses and rotating assets.
In this context, IBERDROLA will make every effort to maintain its shareholder remuneration policy unchanged whilst strengthening the foundations for sustainable long-term growth.
Key operating aspects in the first half of 2012
1) REGULATED BUSINESS: INTERNATIONAL GROWTH
Ebitda from regulated businesses reached €1,980.6 million, a 4.7% rise from the same period last year. This was largely due to international results offsetting the poor performance of business in Spain, whose contribution to the Group is slightly above 30%.
In the UK, Ebitda from regulated businesses rose 8.2% to €446.3 million as a result of new investments that have strengthened the asset base, and the positive effects of the exchange rate.
The regulated business also improved in the United States, rising 6.5% to €356.8 million due to higher revenues, the contribution of Maine Power Reliability Project, the transmission line that links New England with Canada, and the exchange rate.
Ebitda in Brazil rose 36.1% to €495.5 million, largely due to the contribution from Elektro, a 6.1% rise in energy consumption and tariff review. Excluding Elektro, Ebitda from Brazil would have risen 2.6%.
However, Ebitda in Spain fell 12.6% to €682 million, representing 34% of the Group’s total, as a result of the negative impact of measures introduced in Royal Decree Law 13/2012, of 30 March, which have contributed significantly to a fall of €117 million in revenue (-8.8%) and to an increase in taxation of 13.7%.
Despite the adverse economic environment, IBERDROLA has been able to deliver these results thanks to the strategy of fostering regulated activities as a means to attract investment, implemented by the main countries where the company operates. In Spain, however, the trend has been reversed, even though this kind of investments is clearly anticyclical.
2) LOWER DEMAND IN SPAIN AFFECTING LIBERALISED BUSINESS:
Ebitda from the liberalised business fell 4.2% in the first half to €1,248.2 million. A recovery in the retail business in the United Kingdom and good operating results in Mexico partly offset weak results in Spain.
Ebitda in Spain fell 10.3% to €835.9 million driven by lower energy production (-24.4%) and reduced capacity payments as a result of the application of Royal Decree Law 13/2012, of 30 March. Outside Spain, Ebitda of the liberalised business reached €433.3 million.
3) RENEWABLE BUSINESS: IMPROVED RESULTS IN SPAIN
During the first six months of 2012, Ebitda from IBERDROLA’s renewable business rose 12.2% to €848.5 million. This area already contributes 21% to the Group’s total Ebitda. Results in Spain (+23%) exceeded by far that of outside Spain (+3%), as a result of the country’s good wind resource in the period. In contrast to 2010, wind conditions have now been better in Spain than elsewhere.
IMPORTANT INFORMATION
This announcement is not an offer for sale of securities in the United States, nor in any other jurisdiction. The securities referred to herein may not be sold in the United States absent registration or an exemption from registration under the US Securities Act of 1933, as amended.
FORWARD-LOOKING STATEMENTS
This communication contains forward-looking information and statements about IBERDROLA S.A., including financial projections and estimates and their underlying assumptions, statements regarding plans, objectives and expectations with respect to future operations, capital expenditures, synergies, products and services, and statements regarding future performance. Forward-looking statements are statements that are not historical facts and are generally identified by the words “expects,” “anticipates,” “believes,” “intends,” “estimates” and similar expressions.
Although IBERDROLA, S.A. believes that the expectations reflected in such forward-looking statements are reasonable, investors and holders of IBERDROLA, S.A. shares are cautioned that forward-looking information and statements are subject to various risks and uncertainties, many of which are difficult to predict and generally beyond the control of IBERDROLA, S.A., that could cause actual results and developments to differ materially from those expressed in, or implied or projected by, the forward-looking information and statements. These risks and uncertainties include those discussed or identified in the public documents sent by IBERDROLA, S.A. to the Comisión Nacional del Mercado de Valores.
Forward-looking statements are not guarantees of future performance. They have not been reviewed by the auditors of IBERDROLA, S.A. You are cautioned not to place undue reliance on the forward-looking statements, which speak only as of the date they were made. All subsequent oral or written forward-looking statements attributable to IBERDROLA, S.A., or any of its members, directors, officers, employees or any persons acting on its behalf are expressly qualified in their entirety by the cautionary statement above. All forward looking statements included herein are based on information available on the date hereof. Except as required by applicable law, IBERDROLA, S.A. undertakes no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.