Endesda maintains 2021 guidance despite weak first half
12:34, 27 July 2021
Endesa, which is the biggest electricity company in Spain and is controlled by Italian multinational group Enel, reported a 19% drop in earnings before interest, tax, depreciation and amortisation (EBITDA). The company also reported a 26% drop in net profit in the first half of 2021, compared to the same period last year.
The EBITDA came in at €1.88bn ($2.22bn) and the net profit was €832m.
The lower results were mainly due to unfavourable market conditions, characterised by the rise in raw material prices and one-off basis effects. Compared to last year, the EBITDA was 4% lower and the net profit declined by 3%, the company explained.
Endesa’s revenues were 15.6% higher year-on-year at €10.27bn, backed by higher volumes of electricity distributed and higher gas sales. However, margins were under pressure due to rising wholesale prices, especially for gas, and higher average prices for CO2 emission rights.
“The situation of the energy market in Spain, with the sharp increase in wholesale market prices, is not benefitting electricity companies such as Endesa, as we have sold energy to customers at prices lower than those set by the pool [acquistion costs],” said José Bogas Gálves, chief executive of Endesa.
Profit targets maintained
Despite the weaker first-half performance, Endesa has reconfirmed its operating profit and net profit targets for the full year on the back of expected improved performance in the second half, and the expected impact of various management measures aimed at increasing efficiency.
In addition, the company expects to convince the public authorities in Spain to implement structural measures after wholesale market prices have doubled compared to the first half of 2020.
“Our guidance for 2021 as a whole, with EBITDA of €4bn and ordinary net profit of €1.7bn, remains on track despite the exceptional conditions experienced in the first half of the year,” said Luca Passa, Endesa’s chief finance officer. “We expect the situation to normalise in the second half of the year, supported by improved business performance, making the second half of the year similar to that of 2020.
He added: “Specifically, we expect margins to improve in both electricity and gas, once price volatility has been managed; efficiency improvements, in addition to those recorded so far; and an upward performance of the regulated business, driven by the increase in consumption and the acceleration of investments.”
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In the first half of the year, Endesa continued its green transition by increasing CO2 emissions-free output in mainland Spain to 88% of the total, in line with the target of reaching 89% by 2023.
The company will also close all its coal-fired generation business on the Spanish mainland this year.
The company currently has 2,500MW of solar- and wind-power plants under construction, and expects to meet its targets for commissioning 700MW of new clean capacity by 2021 and 900MW more in 2022.
Endesa also maintained its leadership in the electric mobility network in Spain, with a total of 8,000 electric charging stations at the end of the first half, up from 7,500 at the end of March.
In total, Endesa invested more than €700m in the first half of the year to promote its decarbonisation and electrification strategy, 15% more than in the same period of 2020.
Endesa stock lags behind market index
Endesa shares went down 2.4% on Tuesday, 27 July, after the company reported its first-half results.
Its stock has underperformed the Spanish blue-chip index IBEX 35 in the past year, but its performance is consistent with that of the energy sector as a whole, which has failed to benefit from the recent bull run.
In the past year, Endesa’s shares price has declined by 12.7%, compared to an 18.4% increase for the IBEX 35 index. In the same period, shares of Spain’s other energy giant, Iberdrola, were down 7.2%.
Meanwhile, the shares of Endesa’s parent group, Enel, were slightly in the green.
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