Snam Spa ((SNMRY)) has held its Q4 earnings call. Read on for the main highlights of the call.
Snam Spa’s recent earnings call painted a picture of robust financial growth and strategic advancements, despite facing challenges such as rising interest rates and sector-specific demand downturns. The company showcased its strong performance, highlighting infrastructure expansion and emission reduction achievements, signaling continued strength and strategic progress.
Financial Performance and Growth
Snam reported a remarkable 23% increase in EBITDA for 2024 compared to 2022, adding €516 million to its financial performance. Despite the headwinds of higher interest rates, net profit rose by 11%. The company also saw a significant 50% increase in capital expenditures, totaling €8 billion, underscoring its commitment to growth and development.
Infrastructure Expansion
The company made significant strides in expanding its infrastructure, with LNG capacity tripling from 6 bcm to 19 bcm. Storage capacity also saw an increase, reaching 17 bcm, and with the integration of Edison Stoccaggio, total capacity is expected to hit 18 bcm. Additionally, the Tariff RAB experienced a notable 5.8% increase in 2024.
Emission Reduction Success
Snam achieved a 28% reduction in Scope 1 and 2 emissions in 2024 compared to 2022, surpassing its expectations. This achievement highlights the company’s commitment to sustainability and its proactive approach to reducing its environmental impact.
Strategic M&A and Asset Rotation
The earnings call highlighted Snam’s strategic asset rotation, with the disposal of ADNOC gas pipelines and the acquisition of Edison Storage. These moves generated a 14.5% internal rate of return, demonstrating the company’s effective management of its asset portfolio.
Pan-European Multi-Molecule Strategy
Snam continued to advance its pan-European multi-molecule strategy, making significant progress in gas infrastructure and energy transition projects. This strategy positions the company as a key player in the evolving energy landscape.
Interest Rate Impact
The company faced increased net financial expenses by €110 million due to a rise in the net cost of debt, which climbed from 2% in 2023 to approximately 2.5% in 2024. This increase reflects the broader economic environment of rising interest rates.
Investment Delays
Snam’s investments totaled €2.9 billion, slightly below the guidance of €3 billion, due to delays in some projects, including the Ravenna breakwater, which have been pushed to 2025.
Challenges in Gas Demand Dynamics
The thermoelectric sector experienced a 14.4% decline in gas demand, attributed to rising hydroelectric production and increasing renewable generation. This shift in demand dynamics poses challenges for the company.
Write-downs in Gas Infrastructure
The company reported €20 million in write-downs on gas infrastructure projects that were not deemed finalizable, reflecting the challenges in project execution and market conditions.
Forward-Looking Guidance
Looking ahead, Snam provided comprehensive guidance for 2025, with capital expenditures expected to reach €2.9 billion, driven by investments in gas infrastructure, including the Adriatic Line and Ravenna breakwater. The company anticipates an EBITDA of around €2.950 billion and a net income of approximately €1.350 billion. Snam also projects its net debt to be around €18.4 billion by the end of 2025, with a stable net cost of debt at 2.5%. Additionally, the company announced a dividend policy aiming for a 4% annual growth, emphasizing its commitment to shareholder returns.
In summary, Snam Spa’s earnings call highlighted strong financial growth and strategic advancements, despite facing challenges such as rising interest rates and sector-specific demand downturns. The company’s infrastructure expansion and emission reduction achievements underscore its continued strength and strategic progress, positioning it well for future growth.