Pampa Energía SA :PAM-US: Earnings Analysis: Q1, 2016 By the Numbers

Pampa Energía SA reports financial results for the quarter ended March 31, 2016.

We analyze the earnings along side the following peers of Pampa Energía SA – Empresa Nacional de Electricidad S.A. Sponsored ADR, Edenor SA Sponsored ADR Class B, Enersis Americas S.A. Sponsored ADR, Companhia Energetica de Minas Gerais SA Sponsored ADR, Centrais Eletricas Brasileiras S.A. – Eletrobras, YPF SA Sponsored ADR Class D, CPFL Energia S.A. Sponsored ADR and Companhia Paranaense de Energia Sponsored ADR Pfd Class B (EOCC-US, EDN-US, ENIA-US, CIG.C-US, ELET3-BR, YPF-US, CPL-US and ELP-US) that have also reported for this period.

Highlights

  • Summary numbers: Revenues of USD 288.60 million, Net Earnings of USD 41.49 million.
  • Gross margins widened from 6.60% to 21.26% compared to the same period last year, operating (EBITDA) margins now 7.13% from -14.62%.
  • Year-on-year change in operating cash flow of -108.32% is about the same as the change in earnings, likely no significant movement in accruals or reserves.
  • Earnings declined although operating margins improved from -22.58% to 0.04%.

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

2015-03-31 2015-06-30 2015-09-30 2015-12-31 2016-03-31
Relevant Numbers (Quarterly)
Revenues (mil) 194.83 195.47 204.93 171.18 288.6
Revenue Growth (%YOY) 8.4 5.88 5.73 -12.47 48.13
Earnings (mil) 103.37 6.79 4.33 196.3 41.49
Earnings Growth (%YOY) 311.04 -82.3 -62.1 129.16 -59.87
Net Margin (%) 53.06 3.47 2.11 114.68 14.38
EPS 1.66 0.1 0.08 3.05 0.61
Return on Equity (%) 86.63 5.05 3.21 132.42 26.14
Return on Assets (%) 19.67 1.21 0.72 32.76 7.51

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Market Share Versus Profits

Revenues History
Earnings History

PAM-US‘s change in revenue this period compared to the same period last year of 48.13% is almost the same as its change in earnings, and is about average among the announced results thus far in its peer group, suggesting that PAM-US is holding onto its market share. Also, for comparison purposes, revenues changed by 68.60% and earnings by -78.87% compared to the immediate last period.

Revenues Growth Versus Earnings Growth

Earnings Growth Analysis

The company’s year-on-year earnings decline did not come as a result of a contraction in gross margins or because of any cost control issues. Both gross margins and operating margins (EBITDA) margins actually improved over this time frame. Gross margins went from 6.60% to 21.26%, while operating margins improved from -14.62% to 7.13% over this period. For comparison, gross margins were -5.78% and EBITDA margins -49.73% in the immediate last period.

Gross Margin Versus EBITDA Margin

Cash Versus Earnings – Sustainable Performance?

PAM-US‘s change in operating cash flow of -108.32% 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

Despite an overall improvement in operating (EBIT) margins, the company’s earnings fell. EBIT margins went from -22.58% to 0.04%. The decline in earnings appears to be largely because of one-time items. Pretax margins declined from 86.82% to 18.91%.

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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