Against a backdrop of continuing normalisation of commodity prices and weak economic growth, Hera achieved very healthy nine-month 2024 results, through wholly organic growth, generated by activities that are the structural pillars of its business portfolio.
Therefore, the Group has achieved an improvement of all the P&L KPIs, through a 3.1% rise at EBITDA, a 3.5% increase at EBIT and Net Profit accelerating and exceeding by 20.1% the nine-month 2023 level: a set of results that makes it possible to state that Hera is on the right track to meet the Plan’s 2027 targets.
With leverage stable at 2.7 times, Hera confirms its financial strength amidst growing investments and dividends, while preserving plenty of flexibility to carry out M&A transactions with a profile consistent with its strategic focus.
Dear Shareholders,
Hera is continuing to follow the path set out in the 2023-2027 Business Plan, with financial performance confirming, also in the third quarter of 2024, the positive trends recorded in the first half of the year.
The consistency of these results not only reflects the effectiveness of the strategy set, which leverages a well-structured business portfolio, but at the same time proves how the commitment of Hera’s people is translating into high execution capabilities.
In the first nine months of 2024, EBITDA exceeds by 3.1% the challenging nine-month 2023 figure, as a result of the 360-degree contribution from the business portfolio activities
The growth of approximately 31 million euro achieved in the first nine months of 2024, which brings EBITDA to the level of 1,037.6 million euro, is undoubtedly a positive result in quantitative terms, given the significant increase in EBITDA gained in the first nine months of 2023, which for as much as 86 million euro came from the energy efficiency projects related to the Superecobonus tax incentives, ended at the end of last year. The EBITDA progress in the first nine months of 2024 is just as valuable from a qualitative point of view, considering that, despite the expiry of tax bonuses, Hera was able to fully exploit the opportunities in both the regulated and deregulated businesses, with an incremental contribution to the 2023 figure of 43 and 74 million euro respectively.
A driving contribution from Networks
The EBITDA of the Networks, which reached 390.9 million euro, showed a particularly strong dynamic, having increased by 11.4% compared to the first nine months of 2023. Therefore, once again, we have confirmed that we know how to make the most of the opportunities provided by a regulation that, even after ARERA’s latest review, encourages us to make well-targeted investments and manage our assets efficiently, in order to maximise returns.
Despite the weak economy in Italy, Hera has also made significant progress in the liberalised businesses, starting with Waste, where it enjoys a strong position
In the Waste area, EBITDA reached 271.6 million euro with a 5.3% progress, based on the leverage Hera was able to make on its widespread asset base and its ability to offer international waste intermediation services: an attractive business segment, the latter, as it is characterised by high margins, since it does not involve absorption of invested capital.
In a still highly fragmented sector, which
continues to be dominated by an endemic
shortage of waste treatment capacity,
Hera therefore manages to keep a high level of treated
volumes and charge remunerative prices,
even in the presence of cyclical slowdowns in demand.
The successful integration with ACR Reggiani – an M&A transaction whose closing took place in March 2023 – also made a fundamental contribution to our offer and customer portfolio.
Lastly, the rewarding benefits of the prudent policy of hedging the output of Waste-to-Energy plants, whose contracts had been opened by seizing a favourable market timing, should not be underestimated either.
In Energy areas, results went beyond our expectations
Energy EBITDA increased by about 59 million euro, when adjusting the 86 million euro no longer generated with the end of the 110% Ecobonus incentives. Although we still posted around 16 million EBITDA in energy efficiency activities and value-added services, the remaining Energy activities – the bulk of which came from the supply of gas and electricity – generated an EBITDA of 337 million in the first nine months of 2024, compared to 278 million in the same period of 2023.
The higher EBITDA reflects
the expansion of the customer base,
as well as the positive contribution of
contract renewals with formulas that
provide for the full coverage of shaping costs
and their lower impact due to the normalisation of energy prices.
Our focus today is to serve the customers that we have incorporated through the electricity market liberalisation process under free-market contracts, by offering them both value-added services and commercial offers that provide a protection from sharp increases in bills due to any energy price surge in the future.
Basically, nine-month results show how the impact on margins of currently having about one million more customers under the transitory regime has been offset by the organic growth driven by customers under liberalised contracts. Another reassuring consideration comes from noting that customers under the Gradual Protection Service are proving to be good-quality customers: they pay on time and have a high loyalty rate.
EBIT records an even stronger growth than EBITDA, in the wake of the normalisation of the energy market
The 3.1% rise of EBITDA translated into a 3.5% expansion of EBIT mostly as a result of lower provisions for doubtful credits in sales companies, favoured by declining prices of energy commodities. Lower provisions offset higher depreciation due to the operating investments – which in the nine months Hera mainly focused on Networks, waste treatment plants and new customer acquisition.
Hera achieved sound results also in the financial management area, with a 51-million-euro decrease in net charges that allows improvements in operations to be transferred down to the Net Profit, with an amplified impact
Below the EBIT line, Hera proved to be successful
in its efforts to rationalise the financial resources,
by taking advantage of an environment of gradual decline
in both commodity prices and interest rates
The financial management result benefits from cost optimisation, increased income from holdings and the favourable impact of discounting tax credits. In parallel, through continued liability management we could secure a BEI financing at a competitive cost, for 460 million euro, while we proceeded to repay more expensive pre-existing debt, including 288 million euro of the first green bond that Hera issued in 2014, as pioneer in this bond class in Italy.
The combination of these drivers thus boosted the Net profit post minorities, which accounted for 282.9 million euro in the nine months, up 20.1% compared to the same period of 2023.
Leverage remains at a prudent level despite the rising investments and dividends
Being able to rely on significant operating cash generation, in the first nine months of 2024 we could finance net operating investments for about 535 million, 45 million higher compared to the 2023 data, and fund the shareholders remuneration that took place at the end of June, with a dividend up 12%, while preserving a sound financial balance: the Net Debt-to-EBITDA ratio as at 30 September 2024 remains stable at 2.7x compared to the last two quarters. This level confirms that Hera continues to grow while maintaining the potential for additional debt.
In terms of value creation, Hera confirms that it has significantly expanded its returns against a declining WACC
The normalisation of provisions, which were possible in the new scenario, enabled us to translate the higher EBITDA into even higher EBIT and, as a result, also to improve the levels of Return on Invested Capital and Return on Equity – indicators on which we carefully measure the amount of value that we have created quarter after quarter.
Compared to the data as at 30 September 2023, ROI went from 9.0% to 9.5%, while ROE recorded an even greater rise, going from 10.6% to 11.7%.
Hence, we can say that the results
of these first nine months of the year
have already given great satisfaction to Hera’s shareholders
With an average share price around 3.5 euro, shareholders benefited from a dividend yield of about 4% and, considering the results released today, they could also count on an EpS growth of more than 20%, which brings the Total Shareholder Return well above the average annual level of 12% we committed to achieve when we presented the Plan last January.
