Business performance allows the company to confirm expected profit growth by the year end
- Gross operating profit (EBITDA) stands at €3.892 billion, up 1.4% on the same period year on year, and up by 5.8% if atypical factors and the exchange rate effect are excluded
- Recurring net profit amounts to €1.427 billion, a 13,8% increase on the first six months of 2015, thanks to the good business performance and lower financial costs
- The company increased its investments by 42.7% in the period, to nearly €1.9 billion, of which 68% was allocated to growth
- Implementation of its investment plan moved forward, focusing on networks, onshore and offshore wind farm projects and generation facilities with long-term contracts
- Over the period, Iberdrola has hired 1,287 new employees
- The group made purchases amounting to €2.855 billion, up by 37.3% on the same period in 2015, to over 13,900 suppliers and its global contribution to tax authorities amounted to €5.457 billion in the last twelve months
- U.S. subsidiary AVANGRID continues to demonstrate strong operations with a 45% increase in adjusted net profit to June of US$295 million. These good results are reflected in the share price, which has gone up by 27% since its debut on the New York Stock Exchange in December 2015, and market cap which stands around US$14.2 billion
Iberdrola obtained a gross operating profit (EBITDA) of €3.892 billion in the first half of 2016, up by 1.4% on the same period a year ago. If the atypical factors and the effect of the exchange rate are excluded, this item increased by 5.8% in the first six months of the year.
This trend is particularly significant in light of the 6% EBITDA decrease posted in the first quarter and it highlights that the company is fulfilling its forecast of correcting, throughout the year, the impacts of atypical factors which took place in Q1.
Of total EBITDA amount, practically three quarters - 74% - come from regulated businesses or long-term energy sale contracts: networks (48%), renewables (21%) and regulated generation (5%).
Recurring net profit reached €1.427 billion through to June, up 13.8% on the first half of the previous year. This has been possible, mostly, thanks to the good operating performance of all business areas – with gross margin rising 2.1% to €6.776 billion – and the reduction in financial expenditure, which was 30.3% lower than in the first semester of 2015.
Net profit reached €1.4567 billion, 3.3% less than in the first half of 2015. Excluding the extraordinary impact recorded in 2015 as a consequence of the reversal of a fiscal provision for a regional tax, the group’s net profit increased by 13%.
Funds from operations (FFO) stands at €3.227 billion, i.e. an increase of 6.5% on the first six months of previous year.
This amount is higher than the figure for investments, which rose by 42.7% to reach €1.859 billion. Of this amount, 68% was allocated to growth projects and 82% to regulated businesses.
In addition, Iberdrola remains committed to efficiency: on a like-for-like basis, excluding the costs derived from the merger with UIL Holdings Corporation, net operating expenses dropped 1% between the months of January and June.
Group makes progress on 2016-2020 Outlook
Iberdrola continued to make progress implementing its Strategic Outlook for 2016-2020 in the first six months of the year, with new capacity of almost 5,000 megawatts (MW) under construction.
In the networks area, the highlight was the approval of the new remuneration framework in Spain and the approval of the rates for New York State. A new rate proposal was also filed in Connecticut. Additionally, Iberdrola has four transmission projects under construction: Metro-North Railroad (Connecticut), Coopers Mills (Maine), Rochester Area Reliability Project (New York) and Lewiston Loop (Maine).
In the renewables business, the company made progress on its offshore wind farm projects: Wikinger and East Anglia One. Almost half of the foundations have already been laid at the 350-MW Wikinger wind farm, which is being built in German waters of the Baltic Sea. For East Anglia One, located in the North Sea with 714-MW capacity, the company signed the wind turbine supply contract with Siemens.
As regards regulated generation in Mexico, Iberdrola has 2,564 MW under construction out of which 673 MW will be commissioned in the second half of the year. By the time all ongoing projects are complete, which is expected by 2018, the group’s capacity in Mexico will reach 8,000 MW.
Results by business: networks, area with highest growth rate
Iberdrola’s EBITDA in the first six months of the year rose to €3.8921 billion, up 1.4%. Excluding atypical factors and the effect of the exchange rate, the increase in EBITDA was 5.8%.
By business, networks recorded an EBITDA of €1.8945 billion, up 4.3%. The main features were the good performance in the United States, with a 36.2% growth to US$550.2 million, and in Spain where EBITDA stood at €783.9 million, up by 3.5%.
In the United Kingdom, EBITDA for networks was £404.5 million (-2%), whereas in Brazil it reached R$386.8 million (-12.1%).
Generation and retail recorded an EBITDA of €1.226 billion, down 3% as opposed to the 18.1% drop registered during the first quarter, correcting the negative effect of atypical impacts at the beginning of the year.
In Spain, the drop was 2.5% to €756.3 million. A 22% increase in output did not manage to offset the lower results from the gas business.
In the United Kingdom, EBITDA for this business stood at £205.9 million (+1%), with improved gas output, lower costs and a drop in demand, accompanied by rising non-energy costs. In Mexico, it amounted to US$235 million (-7.9%), due to lower rates, although this is expected to improve over the course of the year.
Renewables recorded an EBITDA of €836.5 million, down 3%, mainly due to lower production in the UK. Business performance was particularly good in Spain, where EBITDA grew by 22.7% to €319.7 million, driven by a 7% increase in output.
Renewables also recorded good progress in the United States, with an EBITDA of US$311 million (up 3.9%) and a 10.3% increase in output. In the United Kingdom, however, output fell by 26.2% affecting EBITDA which dropped to £116.6 million (-34.4%).
In Latin America and rest of the world, the renewables business presented an EBITDA of €36.8 million (-2.2%) and €49.9 million (-4.4%), respectively.
AVANGRID, Iberdrola’s U.S. subsidiary, obtained an adjusted net profit of US$295 million in the first six months, 45% more than in the same period of the previous year. Its adjusted EBITDA stood at US$1.048 billion, which means a 9% increase1.
The company’s share price has gone up by 27% since its debut on the New York Stock Exchange back in December 2015 and its market cap is now around US$14.2 billion. In this context, it has already approved the payment of a third dividend against 2015 earnings of US$0.432 per share, payable on October 3.
Financial strength and a comfortable liquidity position
Iberdrola continued to maintain a solid balance sheet in the first semester of the year. Net financial debt stands at €29.978 billion, with a €576 million pro forma reduction (excluding UIL Holdings) compared to the same period of 2015. The group’s leverage is stable at 41.4% at the end of June.
All of the above is reflected in improved financial ratios. If the contribution that AVANGRID would have made between July 2015 and June 2016 is taken into account, the net debt/EBITDA ratio is 3.6 times; funds from operations (FFO)/ net debt would be 22.4% and retained cash flow (RCF)/ net debt would reach 19.7%.
Iberdrola also maintained a comfortable liquidity position which at the close of the second quarter was over €9.5 million. The average debt maturity is 6.2 years.
Social dividend at Iberdrola
In the first half of 2016, Iberdrola continued to contribute to economic and social development in all the regions where it operates.
The company made purchases to 13,900 suppliers across the globe, amounting to €2.855 billion. Also, the group’s total contribution to tax authorities where it operates amounted to €5.457 billion over the last twelve months.
Of that amount, the largest part corresponds to Spain, where Iberdrola paid €3.437 billion last year: €1.536 billion in company taxes and €1.901 billion in collected taxes.
Another important contribution to economic and social development is job creation. In the first six months of the year new recruits amounted to 1,287 people.
The company confirms expected growth for 2016
The operating performance throughout the first half allows Iberdrola to confirm its estimated growth rate for the year end.
The company will meet its target of approximately 5% in EBITDA growth despite the impact of exchange rates and the effect of atypical factors. The company also expects its net profit to increase by a slightly higher rate.
By business, Iberdrola expects the networks area to improve. As for generation and retail, results will either increase or stay stable while renewables will keep up the level recorded in 2015.
All of this will be possible on account of the company’s management, which is based on anticipation and foresight. This means that earnings for the year will not be affected by factors such as the result of the EU referendum in the United Kingdom.
In this regard, it should be pointed out that Iberdrola’s significant geographical - and currency - diversification will offset any possible impact of Brexit. Also, 100% of the net profit for 2016 is hedged against fluctuations in the exchange rate.
1 Results expressed according to the U.S. GAAP accounting principles.