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Profit and Loss Account analysis

The economic results for 2009 and 2010 are shown in the following table:

Income Statement (millions of €) 31-dic-09% Inc. 31-dic-10% Inc.Abs. Change % Change
Revenues4,204.20.0%3,668.60.0%-535.6-12.7%
Change in inv. of fin. prod. and work in prog. (2.9)-0.1%(1.7)0.0%-1.2-41.8%
Other operating income234.75.6%210.45.7%-24.3-10.4%
Raw materials and consumables (2,777.6)-66.1% (2,140.5)-58.3%-637.1-22.9%
Service costs(765.3)-18.2%(810.7)-22.1%+45.4+5.9%
Other operaing costs(37.7)-0.9%(38.8)-1.1%+1.1+2.9%
Personnel costs (352.0)-8.4%(361.9)-9.9%+9.9+2.8%
Capitalised costs63.91.5%81.92.2%+18.0+28.2%
EBITDA567.313.5%607.316.6%+40.0+7.1%
Deprec. and amort. and allowances(276.0)-6.6%(291.9)-8.0%+15.9+5.8%
EBIT291.36.9%315.48.6%+24.1+8.3%
Financial operations(113.4)-2.7%(109.8)-3.0%-3.6-3.2%
Other non-operating costs(15.3)-0.4%-0.0%-15.3-99.9%
Pre-tax profit162.63.9%205.65.6%+43.0+26.4%
Taxes for the year(77.6)-1.8%(63.6)-1.7%-14.0-18.0%
Net profit for the year85.02.0%142.13.9%+57.1+67.2%

* The 2009 figures were reclassified due to application of the IFRIC 12 standards

 

The EBITDA increased from Euro 567.3 million in 2009 to Euro 607.3 million in 2010, +7.1%; the EBIT from Euro 291.3 million to 315.4 million, +8.3%; pre-tax profit increased by 26.4%, from Euro 162.6 million to 205.6 million, net profit from Euro 85.0 million to 142.1 in 2010, +67.2%.

The decrease in electricity trading activities and the fall in the price of the raw material component on the methane gas sales, related to oil price trends, is the main reason behind the drop in Revenues, which fell from Euro 4,204.2 million in 2009 to 3,668.6 million in 2010. These effects are partly offset by the higher volumes sold in the energy areas and disposed of in the waste management area.

Other operating income, equal to Euro 210.4 million, fell compared to the same period of the previous year by Euro 24.3 million, mainly due to the effects of the IFRIC 12 reclassification, which had a Euro 151.9 million impact in 2009 and an impact of Euro 135.2 million in 2010; if this reclassification had not been made, other operating income would have been down by Euro 7.5 million, equal to 9.1%.

The decrease in Costs of raw materials and consumables, equal to Euro 637.1 million compared to the previous year, is linked to the above-mentioned energy dynamics.

Other operating costs (Services costs were up by Euro 45.4 million and Other operating costs increased by Euro 1.1 million), saw a total increase of Euro 46.5 million (+5.8%). Both the application of the IFRIC 12 standard, which fell by about Euro 22.0 million, and the effect of the accounting reclassification on construction of the plants between the group companies had an effect on this item, which results in increased service costs of Euro 12.8 million between 2009 and 2010. The net increase of other operating costs is therefore equal to Euro 55.8 million between 2009 and 2010. About half of this increase is due to the higher costs of electricity transport related to the higher volumes sold, and the other half is due to the increased level of work to build plants and facilities.

Personnel costs rose from Euro 352.0 million in 2009 to Euro 361.9 million in 2010 (+2.8%). The increase is mainly due to the development of contractual dynamics.

The increase in capitalised costs, which went from Euro 63.9 million to 82.9 million is related to the accounting reclassification of work done on the plants between the Group companies for Euro +21.1 million and Euro +3.6 million due to the effect of applying the IFRIC 12 standard; there is therefore an actual fall in capitalised costs of Euro -6.7 million (-8.4%).

The consolidated Group EBITDA for 2010 is up, increasing from Euro 567.3 million as at 31 December 2009 to Euro 607.3 million (+7.1%), thanks to the profit made in the main Group business areas: note the higher volumes of sold and distributed in the energy area, along with higher profits, the increased rates to cover the higher level of services supplied in the water service, and the higher volumes handled and contribution of the new plants in the waste management area.

Amortisation, Depreciation and Allowances increased by 5.8%, from Euro 276.0 million in 2009 to Euro 291.9 million in 2010. The increase is mainly due to the greater allocations to the bad debt provision and, for the rest, to the entry into operation of new plants which offset the effect of the reduction of the amortisation/depreciation rates. The useful life of the energy cycle goods (gas, electricity and district heating) was reviewed during 2010, with the help of an expert report made by an external consultancy company, and in accordance with what was requested by the reference accounting standards. In most cases, the average life was lengthened, with a resulting drop in the depreciation rate of the plants in question; achieving greater standardisation in the rates used. Please refer to the explanatory notes of the financial statements for further details.

The year 2010 therefore shows an EBIT of Euro 315.4 million, up by 8.3% compared to 2009.

The Financial Operations stood at Euro 109.8 million in December 2010 compared to Euro 113.4 million in 2009. There were higher costs due to the following main dynamics, not including the extraordinary effect related to the interest payable on the “state aid” amounts returned of Euro 12.3 million in 2009:

  • Decrease due to the average indebtedness for about Euro 1.6 million.
  • Increase due to a higher long-term debt portion on the total indebtedness of about Euro 9.8 million.
 

The total cost of the financial operations also reflects a Euro 0.4 million increase due to the change in profits from associated companies, dividends and the IAS effects.

It should be also noted that on 31 December 2009, the Group discounted a further Euro 15.3 million connected with the tax moratorium on the item “other non-operating costs”.

In light of the above, the Pre-tax Profit rose from Euro 162.6 million in 2009 to Euro 205.6 million in 2010, an increase of 26.4%, equal to Euro 43.0 million.

Taxes fell from Euro 77.6 million to 63.6 million and take account of non-recurring benefits of Euro 25.0 million. Specifically, the assets acquired by the parent company, Hera S.p.A. due to transfer of the Area Asset and Con.Ami assets and due to the merger by incorporation of Hera Reti Modena, were recorded for an additional statutory value of Euro 160.8 million. This “additional value” which was not recognised on a tax basis, was redeemed in 2010 through application of the substitute tax pursuant to article 176, paragraph 2 – ter of the FCA, for Euro 25.5 million, with resulting recording on the income statement of the deferred taxes due originally recorded to offset the non-deductibility of these additional values. The operation therefore permitted a positive, non-recurring component of Euro 25 million to be recorded to the income statement. The final tax rate amounted to 30.9%.

Net Profit as at 31 December 2010 therefore stands at Euro 142.1 million, up 67.2% compared to Euro 85.0 million in the same period in 2009.