Resilience of results at end September: results benefitted from nuclear volumes in Belgium, the commissioning of new assets and the impacts of the Lean 2018 performance plan, which enabled to compensate the adverse price impact on merchant activities:
Confirmation of the 2016 financial targets1 on net recurring income group share (at the low end of the range), on net debt/Ebitda ratio and on dividend;
Progress in the execution of the transformation plan: EUR 6.1 billion2 of disposals already signed to date (41% of the target for end 2018), EUR 3.1 billion of growth capex invested and progress on the Lean 2018 program with EUR 0.4 billion Ebitda contribution.
Revenues as of September 30, 2016 were EUR 47,514 million, down -11.1% on a gross basis and -10.3% on an organic basis. This organic decrease is mainly attributable to lower commodity prices which impacted exploration and production, retail businesses, gas midstream and LNG activities and power generation businesses and to the temperatures in France less cold over the first nine months of 2016 compared to the same period in 2015.
Group Ebitda amounted to EUR 7,689 million, down -5.4% on a reported basis and -2.0% on an organic basis compared to end of September 2015, which confirms the good performance of our activities in light of the adverse price impacts.
Ebitda for the first 9 months benefitted from the positive impact of the restart of the Doel 3, Tihange 2 and Doel 1 nuclear power plants in Belgium end December 2015, the effects of the Lean 2018 performance plan, the impact of commissioning of new assets and the tariffs increases in infrastructures.
Nevertheless, these positive items were offset by an unfavorable scope effect, an unfavorable exchange rate effect notably related to the Brazilian real, negative price impacts for merchant activities and the temperature impact in France less positive than on the first 9 months of 2015.
Organic Ebitda performance is very contrasted between the reportable segments:
Current operating income amounted to EUR 4,441 million up +1.3% on a gross basis and +6.6% on an organic basis compared to end of September 2015. The organic decrease recorded at Ebitda level is mainly compensated by the positive impact from the reduction of depreciation and amortization charges as a result of the impairment losses recorded at end 2015 and the impact of reclassifying the portfolio of merchant power generation assets in the US as assets held for sale.
As of September 30, 2016, net debt reached EUR 25.8 billion, down EUR 1.9 billion from year-end 2015 and stable compared to June 30, 2016 mainly thanks to a solid Cash Flow From Operations and a favorable forex impact.
Cash Flow From Operations (CFFO) amounted to EUR 6.8 billion for the first 9 months down EUR 0.6 billion versus last year. This evolution reflects both a resilient operational cash flow generation and unfavorable year-on-year changes in working capital requirements of EUR -0.2 billion (mainly due to margin calls and financial derivatives), albeit strongly improving compared to June 30, 2016.
At the end of September, the net debt to EBITDA ratio came out at 2.38, in line with the target of a ratio less than or equal to 2.5x. The average cost of gross debt slightly declines compared to end 2015 at 2.8%.
The Group confirms its 2016 financial targets7 :
Implementation of the strategy
Pave the way for the future
ENGIE announced at the beginning of May 2016 six new non-financial objectives to be achieved by 2020:
ENGIE was nominated 1st utility in the “Multi and Water Utilities” sector of the Dow Jones Sustainability Index (DJSI) World ranked by rating agency RobecoSAM.
Since January 1, 2016, the Group is organized into 24 Business Units (BUs), according to a geographic principle. The new reporting of the Group presents these BUs according to 10 segments, as presented above.
Group revenues decreased by -11.1% on a gross basis, with EUR +131 million scope effects (EUR -325 million for scope out effects related notably to the disposal of commercialization activities in Hungary in 2015 and the disposal of the merchant hydro generation asset portfolio in the United States in 2016 and EUR +456 million for scope in effects related to acquisitions in services including OpTerra early 2016 and Solairedirect at the end of 2015) and EUR –674 million due to exchange rate fluctuations, mainly on the Brazilian real. Revenues decreased by -10.3% on an organic basis.
Revenues for the international segments decreased on a gross and organic basis. This mainly reflects lower sales prices for electricity produced in Brazil and in the United States, despite higher sales in Peru and the commissioning of the Mayakan gas pipeline in Mexico.
In Europe, Benelux revenues are stable on a gross basis due to the restart of Doel 3, Tihange 2 and Doel 1 end of last year, whose very favorable impact is somewhat mitigated by lower sales prices for commercialization activities. In France, revenues are negatively impacted by less cold temperatures compared to last year and by the decrease in market shares in gas for businesses. Revenues for the segment Europe excluding France and Benelux also decreased on a gross basis due to unfavorable forex impacts (Sterling), disposal of retail activities in Hungary, unfavorable temperatures in Italy and lower distribution tariffs in Romania.
Revenues for Infrastructures increased by +4.2% on a gross basis, despite less cold temperatures compared to last year. This growth reflects the annual tariffs adjustment and the development of activities for third parties for gas distribution and transmission infrastructures in France.
Revenues for the segment Global Energy Management and Global LNG on the one hand, and exploration-production on the other hand, decreased by –39.6% and by –20.3% on a gross basis, respectively. This decrease is mainly explained by the drop in commodity prices, notably oil and gas. In exploration-production, the volumes produced slightly decreased year on year.
Revenues for the segment Other also decreased. This is notably explained by the closure of two coal power plants (Gelderland in the Netherlands and Rugeley in the United Kingdom).
The September 30, 2016 financial information presentation used during the investor conference call is available to download from the Group’s website.
The figures presented here are those customarily used and communicated to the markets by ENGIE. This message includes forward-looking information and statements. Such statements include financial projections and estimates, the assumptions on which they are based, as well as statements about projects, objectives and expectations regarding future operations, profits, or services, or future performance. Although ENGIE management believes that these forward-looking statements are reasonable, investors and ENGIE shareholders should be aware that such forward-looking information and statements are subject to many risks and uncertainties that are generally difficult to predict and beyond the control of ENGIE, and may cause results and developments to differ significantly from those expressed, implied or predicted in the forward-looking statements or information. Such risks include those explained or identified in the public documents filed by ENGIE with the French Financial Markets Authority (AMF), including those listed in the “Risk Factors” section of the ENGIE (ex GDF SUEZ) reference document filed with the AMF on March 23, 2016 (under number D.16-0195). Investors and ENGIE shareholders should note that if some or all of these risks are realized they may have a significant unfavorable impact on ENGIE;
ENGIE develops its businesses (power, natural gas, energy services) around a model based on responsible growth to take on the major challenges of energy’s transition to a low-carbon economy: access to sustainable energy, climate-change mitigation and adaptation, and the rational use of resources. The Group provides individuals, cities and businesses with highly efficient and innovative solutions largely based on its expertise in four key sectors: renewable energy, energy efficiency, liquefied natural gas and digital technology. ENGIE employs 154,950 people worldwide and achieved revenues of €69.9 billion in 2015. The Group is listed on the Paris and Brussels stock exchanges (ENGI) and is represented in the main international indices: CAC 40, BEL 20, DJ Euro Stoxx 50, Euronext 100, FTSE Eurotop 100, MSCI Europe, DJSI World, DJSI Europe and Euronext Vigeo (Eurozone 120, Europe 120 and France 20).
1 Assuming average temperatures in France, full pass through of supply costs in French regulated gas tariffs, no significant regulatory and macro-economic changes, commodity price assumptions based on market conditions as of December 31st, 2015 for the non-hedged part of the production, and average foreign exchange rates as follows for 2016: €/$: 1.10; €/BRL: 4.59.
2 Net debt impact.
3 Excluding scope and forex effects.
4 EBITDA new definition (excluding non-recurring contribution of share in net income of entities accounted for using the equity method)
5 Including share in net income of associates
6 Cash Flow From Operations (CFFO) = Free Cash Flow before Maintenance Capex
7 Assuming average temperatures in France, full pass through of supply costs in French regulated gas tariffs, no significant regulatory and macro-economic changes, commodity price assumptions based on market conditions as of December 31st, 2015 for the non-hedged part of the production, and average foreign exchange rates as follows for 2016: €/$: 1.10; €/BRL: 4.59.
8 Excluding significant scope impact and changes of the accounting treatment of the nuclear contribution in Belgium.
9 An interim dividend of €0,5/share for fiscal year 2016 has been paid on October, 14, 2016.