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Snam Rete Gas 2008 preliminary results

Price sensitive
  • Transportation revenue: € 1,867 million; +6.3%
  • EBIT: € 1,022 million; +8.0% compared to adjusted 2007*
  • Net profit: € 530 million; +19.9% compared to adjusted 2007*
  • Investments: € 1,044 million, +43.4% compared to 2007
  • Natural gas injected into the transportation network: 85.64 billion cubic metres, +2.8% compared to 2007
 
Proposed dividend € 0.23 per share (+9.5%), of which € 0.09 already distributed as interim dividend
 
San Donato Milanese, 12 February 2009. The board of directors of Snam Rete Gas S.p.A. reviewed today the group’s (unaudited) preliminary 2008 results.
 
Carlo Malacarne, CEO of Snam Rete Gas, commented:
 
These results confirm the strength of our business model even in a market environment characterized by global economic downturn. The significant level of investment carried out and our commitment to efficiency has allowed us to achieve a significant increase in operating profit.�?.
Key operating and financial figures
 
2006
 
2007
 
2008
 
Change
 
Change %
 
 
 
 
 
 
 
2008 vs. 2007
 
2008 vs. 2007
Total revenue
1,789
 
1,868
 
            1,910
 
42
 
2.2
Operating costs
395
 
357
 
               399
 
42
 
11.8
EBIT
911
 
1,022
 
            1,022
       
Adjusted EBIT
905
 
946
 
            1,022
 
76
 
8.0
Net profit
448
 
594
 
               530
 
(64)
 
(10.8)
Adjusted net profit
445
 
442
 
               530
 
88
 
19.9
Net financial debt
5,255
 
5,882
 
            6,236
 
354
 
6.0


* Adjusted profit is profit net of non-recurring transactions and other special items. The section on “Significant non-recurring transactions and events and other special items�? on page 37 of the 2007 Annual Report includes a reconciliation of EBIT and net profit to the adjusted figures for 2006 and 2007. There were no non-recurring transactions or other special items in 2008.
 
Key financial ratios
 
2006
2007
2008
Dividend (per share)
0.19
0.21
0.23
EPS (€) (*)
0.23
0.34
0.30
Adjusted EPS (€) (*)
0.23
0.25
0.30
Average number of shares outstanding during the year (milions)
1,906.4
1,773.2
1,761.0
Leverage (%)
58.7
62.6
63.6


 (*) Calculated considering the average number of shares outstanding during the year.
 
Financial highlights
  • Total revenue: € 1,910 million, of which € 1,867 million related to the transportation services (+€ 110 million; +6.3%); the increase is due to: (i) the incentives received from investments made in 2006 and 2007 (+€ 77 million); (ii) the recognition by the Electricity and Gas Authority of the higher fuel gas costs in the thermal years 2005-2006 and 2006-2007 1 (+€ 45 million); and (iii) the higher volumes of gas transported (+€ 15 million). These positive factors were partly offset by the updated transportation tariffs (-€ 28 million)
  • Adjusted EBIT: € 1,022 million (+8.0% compared to adjusted 2007); the € 76 million increase is principally due to the higher transportation revenue (+€ 106 million, net of the items netted against costs 2) partly offset by higher operating costs (-€ 32 million, net of the items netted against revenue), which were mainly affected by the increase in fuel gas costs (-€ 31 million)
  • Adjusted net profit: € 530 million (+19.9% compared to 2007 adjusted); the increase is due to the higher EBIT (+€ 76 million) and decrease in income taxes (+€ 28 million), the effects of which were partly offset by higher net interest expense (-€ 16 million)
  • Net financial debt: € 6,236 million; +€ 354 million compared to 31 December 2007. The increase is mainly due to the high level of investments (-€ 1,021 million) and payment of dividends (-€ 387 million) compared to net cash flows from operating activities (+€ 1,053 million)
  • Leverage (net financial debt/net invested capital): 63.6% (62.6% at 31 December 2007)
 
 
1 With its resolution no. VIS 8/09, published on 5 February 2009, the Electricity and Gas Authority both recognised the higher costs of  fuel gas in the thermal years 2005-2006 and 2006-2007 and stated that recognition of additional costs for the thermal years 2007-2008 and 2008-2009 would be determined with subsequent  resolutions.
2 EBIT is analysed by considering only those elements that have led to a change therein as application of the gas sector tariff regulations generates cost and revenue components which are netted.
 

Key operating figures

 

 
2006
2007
2008
Change
Change %
 
 
 
 
2008 vs. 2007
2008 vs. 2007
Natural gas injected into the National Gas Pipeline Network (billions of cubic metres)
87.99
83.28
85.64
2.4
2.8
Regasification of liquefied natural gas (LNG) (billions of cubic metres)
3.13
2.38
1.52
(0.9)
(36.1)
Gas Pipeline Network (kilometres in use)
       30,889
   31,081
     31,474
        393
           1.3
Investments (€m)
675
728
1,044
316
         43.4


 

 Operating highlights

  • Investments: € 1,044 million (+43.4%), 88% of which is expected to be incentivised 3. Investments mainly related the upgrading of the import infrastructure from North Africa and the Po valley
  • Gas injected into the transportation network: 85.64 billion cubic metres (+2.8%); the 2.36 billion cubic metre increase is due to higher imports (+3.02 billion cubic metres, +4.1%), partly offset by the decrease in domestic production (-0.66 billion cubic metres, -6.7%). Domestic demand for natural gas of 84.88 billion cubic metres is substantially in line with 2007 (-0.02 billion cubic metres). The decrease in industrial sector demand, mainly due to the economic crisis, was offset by the rise in demand from the residential and services sectors mainly due to the cold weather

Dividend

The board of directors intends to propose to the shareholders in their meeting to be held on 16 and 17 April 2009 (on first and second call, respectively) the distribution of a dividend 4 of € 0.23 per share (+9.5% on 2008), € 0.09 of which was already distributed as interim dividend in October 2008. The remaining € 0.14 per share will be payable from 21 May 2009 (ex dividend date 18 May 2008).  

3 The allocation of the 2008 investments to the different project categories will be reviewed by the Electricity and Gas Authority during presentation of the tariff proposals for the thermal year 2009-2010.

4 The dividend is subject to different tax rates, depending on the recipient (individual or legal entity) and/or the nature of the investment (qualified, unqualified).
 

Outlook

 
  • Gas demand in Italy
    Domestic gas demand is expected to grow by an average annual 2% in the 2009-2012 period, due to the estimated 5% increase in consumption in the thermoelectric sector
  • Investments
    The group plans to invest € 4.3 billion in the four years from 2009 to 2012, approximately € 1 billion of which will be in 2009 for projects to upgrade the Italian natural gas transportation infrastructure. This is necessary to facilitate market growth and improve the system’s safety and flexibility. The planned investment projects will allow higher transportation capacity, especially the existing import points, and the development of new interconnection points with foreign pipelines
  • Efficiency
    Snam Rete Gas will continue in 2009 to increase its operating efficiency, mainly by optimising its organisational and technological structures.

Pursuant to article 154-bis.2 of the “Testo Unico della Finanza�? (TUF), the manager in charge of financial reporting, Antonio Paccioretti, states that the financial information included in this press release complies with the relevant documentation, accounting ledgers and records

Disclaimer
This press release includes forward-looking statements, especially in the section on the group’s outlook about future gas demand, investment plans, dividends and future performance. Such statements are, by their very nature, subject to risk and uncertainty as they depend on the fact that certain events and developments will take place. The actual results may differ from those communicated due to various reasons, such as foreseeable trends in demand, offer and natural gas prices, actual performances, general macro-economic conditions, the effect of new energy and environment legislation, the successful development and implementation of new technologies, changes in stakeholders’ expectations and other changes in business conditions.
Contacts
Snam Rete Gas Investor Relations
Tel +39.02.520.67272 - Fax: +39.02.520.67650
e-mail: investor.relations@snamretegas.it
 
Snam Rete Gas External Relations
Tel. +39 02 520.67691 - Fax +39.02.520.69227
 
Eni Press Office
Tel +39 02.52031875 – +39 06.5982398
e-mail: ufficio.stampa@eni.it
   
Summary of the 2008 preliminary figures
 
EBIT recorded for 2008 amounts to € 1,022 million, unchanged from 2007. EBIT increased by € 76 million (+8%) compared to 2007 adjusted (excluding the effect of non-recurring transactions recognised in 2007) mainly due to the increase in transportation revenue (+€ 106 million), partly offset by the increase in operating costs (-€ 32 million), principally attributable to the higher variable costs of fuel gas for the compression stations (-€ 28 million) and network losses (-€ 3 million) as well as the increase in controllable fixed costs (-€ 2 million).
 
The net profit (€ 530 million) decreased by € 64 million (10.8%) compared to 2007. The net profit increased by € 88 million (19.9%) compared to 2007 adjusted due to the higher EBIT (+€ 76 million), lower income taxes (+€ 28 million), mainly due to the decrease in the IRES and IRAP rates, applicable from 1 January 2008, the effects of which were partly absorbed by the increase in net financial expense (-€ 16 million). The increase in net financial expense is due to the rise in average financial debt (approximately € 400 million) and the higher average cost of debt, which increased from 4.1% in 2007 to 4.2% in 2008.
 
Income taxes (€ 266 million) increased by € 38 million compared to the previous year, mainly due to the recognition in 2007 of lower taxes for the non-recurring transactions and other special items for a total of € 66 million. Excluding these effects, income taxes decreased by € 28 million, principally attributable to the decrease in the IRES and IRAP rates (from 33% to 27.5% and from 4.25% to 3.9%, respectively). Current taxes decreased by € 106 million, mainly due to: (i) the reduction in the IRES and IRAP rates; (ii) greater refence to the net profit recognised in the financial statement to determine taxable income for both IRES and IRAP purposes; this principle led to a decrease in deferred tax assets; and (iii) the reduction in pre-tax profit.
 
The tax rate was 33.4% compared to 27.7% in 2007. The increase is mainly due to the non-recurring transactions and other special items recognised in 2007.
  
RECLASSIFIED CONSOLIDATED BALANCE SHEET
     
(€m)
 
31.12.2007
31.12.2008
Change
Non-current assets
9,786
10,302
516
Net working capital
(368)
(464)
(96)
Provisions for employee benefits
(29)
(29)
 
Net invested capital
9,389
9,809
420
 
 
 
 
Equity
3,507
3,573
66
Net financial debt
5,882
6,236
354
Cover
9,389
9,809
420
  
Net invested capital (€ 9,809 million) increased by € 420 million compared to 31 December 2007, due to the rise in non-current assets (+€ 516 million) mainly as a result of investments made during the year (+€ 1,044 million), amortisation and depreciation (-€ 489 million) and the change in net payables for investments ( -€ 74 million), partly offset by the reduction in net working capital (-€ 96 million).
 
The change in net working capital of € 96 million is mainly due to: (i) the decrease in fair value of derivative financial instruments (-€ 111 million) related to the reduction in market interest rates; (ii) the decrease in other assets (-€ 79 million), principally due to the collection of the first instalment of the receivable due from the Sicilian Regional Authorities for repayment of the amounts paid in 2002 by the company to the Authorities for the regional tax on title to pipelines 5 and the subsequent factoring without recourse of the remaining receivable (-€81 million); (iii) higher deferred and accrued income related to transportation revenue (-€ 34 million). These factors were partly offset by: (i) the decrease in deferred tax liabilities (+€ 54 million); (ii) the increase in inventories (+€ 33 million); and (iii) the decrease in tax payables (+€ 22 million).
 
5 Greater information about the regional tax on title to pipelines is given in note 21 “ Guarantees, commitments and risks – Litigation�? on page 124 of the 2007 Annual Report.
  
Net financial debt and leverage
 
The leverage ratio shows a company’s degree of indebtedness and is the net financial debt to net invested capital ratio. It is one of the key ratios used to gauge the soundness and efficiency of a company’s financial position.
 
(€m) 31.12.2007 31.12.2008 Change
Financial liabilities 5,883 6,237 354
Short-term financial liabilities 1,367 1,023 (344)
Current portion of long-term financial liabilities 15 14 (1)
Long-term financial liabilities 4,501 5,200 699
Financial receivables and cash and cash equivalents (1) (1)  
Financial receivables (*) (1) (1)  
Cash and cash equivalents  (*)      
  5,882 6,236 354
(*) The balance of two current accounts (€ 1 million) has been reclassified from "Cash and cash equivalents" at 31 December 2007 to "Financial receivables" as their use is restricted.
  
Net financial debt amounted to € 6,236 million, an increase of € 354 million compared to 31 December 2007. The increase in net financial debt is mainly due to: (i) net investment outlays (-€ 1,021 million); and (ii) cash flows of equity (-€ 386 million) principally due to payment of the dividend (€ 387 million, € 229 million of which related to the balance of the 2007 dividend and € 158 million related to the interim 2008 dividend) only partly offset by the net cash flows from operating activities (+€ 1,053 million). 
 
Long-term financial liabilities of € 5,214 million made up 83% of net financial debt (77% at 31 December 2007). The average maturity of the long-term financing, including the current portion, is just over four years (four years at 31 December 2007).  There are no financial liabilities subject to covenants.
 
A breakdown of financial debt by type of interest rate is as follows:
 
  31.12.2007 % 31.12.2008 % Change
.floating rate 2,521 43 2,524 40 3
.fixed rate (*) 2,862 49 3,713 60 851
.inflation-linked rate (*) 500 8     (500)
  5,883 100 6,237 100 854
  
RECLASSIFIED CONSOLIDATED INCOME STATEMENT
 
2006
2007
2008
Change
Change %
Core business revenue
1,760
1,790
1,902
112
6.3
Other revenue and income
29
78
8
(70)
(89.7)
including: non-recurring and other special items
20
71
 
(71)
(100.0)
Total revenue
1,789
1,868
1,910
42
2.2
Operating costs (*)
(395)
(357)
(399)
(42)
11.8
including: non-recurring and other special items
(14)
5
 
(5)
(100.0)
EBITDA
1,394
1,511
1,511
 
 
Adjusted EBITDA
1,388
1,435
1,511
 
 
Amortisation, depreciation and impairment losses
(483)
(489)
(489)
   
EBIT
911
1,022
1,022
   
Adjusted EBIT
905
946
1,022
76
8.0
Net financial expense
(168)
(200)
(226)
(26)
13.0
including: non-recurring and other special items
 
10
 
(10)
(100.0)
Profit before tax
743
822
796
(26)
(3.2)
Income taxes
(295)
(228)
(266)
(38)
16.7
including: non-recurring and other special items
(3)
66
 
(66)
(100.0)
Net profit (**)
448
594
530
(64)
(10.8)
Adjusted net profit (**)
445
442
530
88
19.9
(*) Operating costs include the captions “Purchases, services and other costs�? and “Personnel expense�? of the consolidateed income statement included in the consolidated financial statements.
(**) The net profit for the year is wholly attributable to the shareholders of Snam Rete Gas.
   

Reclassified consolidated balance sheet

 

The reclassified consolidated balance sheet combines the assets and liabilities of the legally-required balance sheet format included in the annual and half year reports in accordance with their function, split into the three basic functions: investment, operations and financing.

Company management holds that this format presents information useful for investors as it allows identification of the sources of financing (own and third party funds) and the application of such funds for non-current assets and working capital.
The reclassified balance sheet format is used by management to calculate the key leverage ratios.
 

RECLASSIFIED CONSOLIDATED BALANCE SHEET

      (€m)
  31.12.2007 31.12.2008 Change
Property, plant and equipment 9,957 10,549 592
Intangible assets 41 39 (2)
Net payables for investments (212) (286) (74)
Non-current assets 9,786 10,302 516
Net working capital (368) (464) (96)
Provisions for employee benefits (29) (29) 0
Net working capital 9,389 9,809 420
       
Equity 3,507 3,573 66
Net financial debt 5,882 6,236 354
Coverage 9,389 9,809 420


  

Reclassified consolidated cash flow statements

The reclassified cash flow statement set out below summarises the legally-required format. It shows the opening and closing cash and cash equivalents and the change in net financial debt during the year. The two statements are reconciled through the free cash flow, ie the cash surplus or deficit left over after servicing capital expenditure. The free cash flow closes either: (i) with the change in cash and cash equivalents for the period, after adding/deducting all cash flows related to financial liabilities/assets (taking out/repayment of loans), and equity (payment of dividends/capital injections); or (ii) with the change in net financial debt for the period, after adding/deducting the debt flows related to equity (payment of dividends/capital injections), and the changes in the opening and closing balances related to changes in exchange rates.

 

RECLASSIFIED CONSOLIDATED CASH FLOW AND CHANGE IN NET FINANCIAL DEBT

      
(€m)
 
2006
2007
2008
Net profit for the year
448
594
530
Adjusted by:
     
- Amortisation, depreciation and other non-monetary components
496
488
488
- Interest and income taxes
462
426
490
Cash flows from operating activities before changes in working capital
1,406
1,508
1,508
Change in working capital due to operating activities
73
2
90
Interest and income taxes paid
(537)
(576)
(545)
Net cash flows from operating activities
942
934
1,053
Investments in property, plant and equipment and intangible assets
(629)
(727)
(1,097)
Disinvestments
2
1
2
Net payables for investments
31
(24)
74
Free cash flow
346
184
32
Change in financial liabilities
436
627
354
Cash flows of equity
(782)
(811)
(386)
Net cash flows for the year
0
0
0


   

CHANGE IN NET FINANCIAL DEBT

 

 
2006
2007
2008
 
 
 
 
Free cash flow
346
184
32
Cash flows of equity
(782)
(811)
(386)
Change in net financial debt
(436)
(627)
(354)


 
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updated
05 August 2016 - 16:18 CEST