Pampa Energía SA :PAM-US: Earnings Analysis: 2015 By the Numbers

Pampa Energía SA reports financial results for the year ended December 31, 2015.

We analyze the earnings along side the following peers of Pampa Energía SA – Empresa Nacional de Electricidad S.A. Sponsored ADR, Enersis Americas S.A. Sponsored ADR and YPF SA Sponsored ADR Class D (EOC-US, ENI-US and YPF-US) that have also reported for this period.

Highlights

  • Gross margins narrowed from 2.25% to -0.02% compared to the same period last year, operating (EBITDA) margins now -27.08% from -18.86%.
  • Year-on-year change in operating cash flow of 15.08% is about the same as the change in earnings, likely no significant movement in accruals or reserves.
  • Earnings growth due to contribution of one-time items.

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

2011 2012 2013 2014 2015
Relevant Numbers (Annual)
Revenues 1405.49 1656.21 968.57 754.92 767.28
Revenue Growth (YOY) N/A N/A N/A N/A N/A
Earnings -153.46 -137.35 74.97 90.42 328.42
Earnings Growth (YOY) -1192.1 10.5 154.58 20.61 263.22
Net Margin -10.92 -8.29 7.74 11.98 42.8
EPS -3.41 -2.71 0.99 1.55 6.1
Return on Equity -14.61 -20.36 16.39 21.01 61.54
Return on Assets -5.65 -5.37 3.54 4.61 15.48

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Earnings Growth Analysis

The company’s earnings rose year-on-year. But this growth has not come as a result of improvement in gross margins or any cost control activities in its operations. Gross margins went from -0.02% to 2.25% for the same period last year, while operating margins (EBITDA margins) went from -27.08% to -18.86% over the same time frame.

Gross Margin Versus EBITDA Margin

Cash Versus Earnings – Sustainable Performance?

PAM-US‘s change in operating cash flow of 15.08% compared to the same period last year is about the same as its change in earnings this period. Additionally, this change in operating cash flow is about average among its peer group. This suggests that the company did not use accruals or reserves to manage earnings this period, and that, all else being equal, the earnings number is sustainable.

Operating Cash Flow Growth Versus Earnings Growth

Margins

The company’s operating (EBIT) margins contracted from -26.39% to -37.40%. In spite of this, the company’s earnings rose. This was influenced primarily by one-time items, which improved pretax margins from 9.63% to 61.95%.

EBIT Margin Versus PreTax Margin
EBIT Margin History
PreTax Margin History

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Company Profile

Pampa Energía SA engages in the electricity generation, transmission and distribution through its subsidiaries and joint ventures. It operates through the following segments: Electricity Generation, Electricity Transmission, Electricity Distribution, and Holding and Others. The Electricity Generation segment includes two hydroelectric power generation systems and a thermal generation plant. The Electricity Transmission segment owns, operates, and maintains the high voltage electricity transmission system. The Electricity Distribution segment distributes electricity. The Holding And Others segment offers financial investment operations, holding activities, oil and gas exploitation, and other businesses. The company was founded on February 20, 1945 and is headquartered in Buenos Aires, Argentina.

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