Pampa Energía SA :PAM-US: Earnings Analysis: Q4, 2016 By the Numbers : March 16, 2017

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

We analyze the earnings along side the following peers of Pampa Energía SA – Enel Generacion Chile S.A. Sponsored ADR, Enel Americas S.A. Sponsored ADR and YPF SA Sponsored ADR Class D (EOCC-US, ENIA-US and YPF-US) that have also reported for this period.

Highlights

  • Summary numbers: Revenues of USD 833.61 million, Net Earnings of USD 62.90 million.
  • Gross margins widened from -5.78% to 25.67% compared to the same period last year, operating (EBITDA) margins now 15.29% from -49.73%.
  • Year-on-year change in operating cash flow of 528.63% is about the same as the change in earnings, likely no significant movement in accruals or reserves.
  • Earnings declined although operating margins improved from -63.63% to 5.86%.

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

2016-12-31 2016-09-30 2016-06-30 2016-03-31 2015-12-31
Relevant Numbers (Quarterly)
Revenues (mil) 833.61 656.7 289.8 288.6 171.18
Revenue Growth (%YOY) 386.98 220.45 48.26 48.13 -12.47
Earnings (mil) 62.9 -61.84 -46.45 41.49 196.3
Earnings Growth (%YOY) -67.96 -1527.79 -783.86 -59.87 129.16
Net Margin (%) 7.55 -9.42 -16.03 14.38 114.68
EPS 0.85 -0.91 -0.68 0.61 3.05
Return on Equity (%) 27.2 -33.14 -32.19 26.14 132.42
Return on Assets (%) 5.03 -6.69 -8.37 7.51 32.76

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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 386.98% 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 26.94% and earnings by 201.70% compared to the immediate last period.

Revenues Growth Versus Earnings Growth

Quadrant label definitions. Hover to know more

Leader, Earnings Focus, Laggard, Revenues Focus

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 -5.78% to 25.67%, while operating margins improved from -49.73% to 15.29% over this period. For comparison, gross margins were 15.93% and EBITDA margins 4.09% in the immediate last period.

Gross Margin Versus EBITDA Margin

Quadrant label definitions. Hover to know more

Differentiated; Low Cost, Commodity; Low Cost, Commodity; High Cost, Differentiated; High Cost

Cash Versus Earnings – Sustainable Performance?

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

PAM-US‘s change in operating cash flow of 528.63% 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

Quadrant label definitions. Hover to know more

Cash Flow based Earnings, Likely Non-cash Earnings, Low Cash Flow Base, Likely Undeclared Earnings

Margins

Despite an overall improvement in operating (EBIT) margins, the company’s earnings fell. EBIT margins went from -63.63% to 5.86%. The decline in earnings appears to be largely because of one-time items. Pretax margins declined from 119.78% to 5.49%.

EBIT Margin Versus PreTax Margin

Quadrant label definitions. Hover to know more

Operation driven Earnings, One-time Favorables, Low Earnings Base, One-time Unfavorables
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: Gas Transportation; Production and Marketing of Gas Liquids; and Other Services. The Gas Transportation segment enabled transportation services. The Production and Marketing of Gas Liquids segment offers gas liquids production and selling activities. The Other Services segment consist of treatment, impurity separation, and gas compression. The company was founded on February 20, 1945 and is headquartered in Buenos Aires, Argentina.

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