Centrais Elétricas Brasileiras SA :EBR-US: Earnings Analysis: 2016 By the Numbers : April 3, 2017

Centrais Elétricas Brasileiras SA reports financial results for the year ended December 31, 2016.

Highlights

  • Gross margins widened from 42.21% to 70.28% compared to the same period last year, operating (EBITDA) margins now 27.46% from -34.47%.
  • Change in operating cash flow of -67.92% compared to same period last year is about the same as change in earnings, likely no significant movement in accruals or reserves.
  • Earnings growth from operating margin improvements as well as one-time items.

The table below shows the preliminary results and recent trends for key metrics such as revenues and net income growth:

2016 2015 2014 2013 2012
Relevant Numbers (Annual)
Revenues 17753.85 9751.23 12852.85 13003.8 19899.74
Revenue Growth (YOY) N/A N/A N/A N/A N/A
Earnings 1001.22 -4321.22 -1288.08 -2854.35 -3524.21
Earnings Growth (YOY) 123.17 -235.48 54.87 19.01 -257.03
Net Margin 5.64 -44.31 -10.02 -21.95 -17.71
EPS 0.73 -3.19 -0.95 -2.11 -2.61
Return on Equity 8.31 -27.06 -5.47 -9.74 -9.49
Return on Assets 2.22 -9.37 -2.28 -4 -4.11

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Earnings Growth Analysis

The company’s earnings growth was influenced by year-on-year improvement in gross margins from 42.21% to 70.28% as well as better cost controls. As a result, operating margins (EBITDA margins) rose from -34.47% to 27.46% compared to the same period last year. For comparison, gross margins were 42.21% and EBITDA margins were -34.47% in the last reporting period.

Cash Versus Earnings – Sustainable Performance?

It is important to examine a company�s cash versus earnings numbers to gauge whether its performance is sustainable.

EBR-US‘s year-on-year change in operating cash flow of -67.92% is around its change in earnings. This suggests that there are likely no significant movement in accruals or reserves for managing earnings this period.

Margins

The company’s earnings growth has also been influenced by the following factors: (1) Improvements in operating (EBIT) margins from -40.12% to 24.43% and (2) one-time items. The company’s pretax margins are now 14.67% compared to -45.34% for the same period last year.

EBIT Margin History
PreTax Margin History

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Company Profile

Centrais Elétricas Brasileiras SA engages in the production and dissemination of electricity. It operates through the following segments: Management, Generation, Transmission, and Distribution. The Management segment refers to the corporate and administrative activities of the firm. The Generation segment operates wind farms, solar panels and hydroelectric, thermoelectric, and thermonuclear plants. The Transmission segment manages electric power transmission lines. The Distribution segment is responsible for the circulation of electric power. The company was founded in June 11, 1962 by Getulio Dornelles Vargas and is headquartered in Rio de Janeiro, Brazil.

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