YPF SA :YPF-US: Earnings Analysis: Q3, 2017 By the Numbers : December 13, 2017

YPF SA reports financial results for the quarter ended September 30, 2017.

We analyze the earnings along side the following peers of YPF SA – BP p.l.c. Sponsored ADR, Total SA Sponsored ADR Class B, Marathon Oil Corporation, Petroleo Brasileiro SA Sponsored ADR, Royal Dutch Shell Plc Sponsored ADR Class A, Exxon Mobil Corporation, Chevron Corporation and Repsol SA Sponsored ADR (BP-US, TOT-US, MRO-US, PBR-US, RDS.A-US, XOM-US, CVX-US and REPYY-US) that have also reported for this period.

Highlights

  • Summary numbers: Revenues of USD 3,779.79 million, Net Earnings of USD 5.32 million.
  • Gross margins widened from 12.67% to 13.87% compared to the same period last year, operating (EBITDA) margins now 26.62% from 28.90%.
  • Year-on-year change in operating cash flow of -42.07% 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:

2017-09-30 2017-06-30 2017-03-31 2016-12-31 2016-09-30
Relevant Numbers (Quarterly)
Revenues (mil) 3779.79 3749.3 3658.45 3494.44 3705.58
Revenue Growth (%YOY) 2 2.27 14.16 -10.36 -15.83
Earnings (mil) 5.32 13.21 1.6 110.23 -2004.5
Earnings Growth (%YOY) 100.27 125.59 -97.64 168.3 -1107.36
Net Margin (%) 0.14 0.35 0.04 3.15 -54.09
EPS 0.01 0.03 0 0.28 -5.1
Return on Equity (%) 0.07 0.18 0.02 1.49 -24.04
Return on Assets (%) 0.08 0.2 0.02 1.66 -29.24

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Market Share Versus Profits

Revenues History
Earnings History

YPF-US’s change in revenue this period compared to the same period last year of 2.00% 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 YPF-US is holding onto its market share. Also, for comparison purposes, revenues changed by 0.81% and earnings by -59.71% 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 earnings growth has been influenced by the year-on-year improvement in gross margins from 12.67% to 13.87%. However the company’s overhead costs have prevented it from fully capitalizing on these gross margin improvements. In fact, the company’s operating margins (EBITDA margins) showed no improvement over the same period last year.

Gross Margin Versus EBITDA Margin

Quadrant label definitions. Hover to know more

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

Gross Margin Trend

Companies sometimes sacrifice improvements in revenues and margins in order to extend friendlier terms to customers and vendors. Capital Cube probes for such activity by comparing the changes in gross margins with any changes in working capital. If the gross margins improved without a worsening of working capital, it is possible that the company’s performance is a result of truly delivering in the marketplace and not simply an accounting prop-up using the balance sheet.

Gross Margin History
Working Capital Days History

YPF-US’s gross margin improvement has not produced any big difference in its working capital. Working capital days are currently 27.71, compared to last year’s level of 10.14 days. This leads Capital Cube to conclude that the improvements in gross margins are likely from operating decisions and not trade-offs with the balance sheet.

Gross Margin Versus Working Capital Days

Quadrant label definitions. Hover to know more

Customer Financed, Cash Starved, Supplier Financed, Cash Rich

Cash Versus Earnings – Sustainable Performance?

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

YPF-US’s change in operating cash flow of -42.07% 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

The company’s operating (EBIT) margins contracted from 4.16% to 4.14%. In spite of this, the company’s earnings rose. This was influenced primarily by one-time items, which improved pretax margins from -67.81% to 0.90%.

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

YPF SA is engaged in the exploration, production and distribution of oil and gas. It operates through the following segments: Exploration and Production, Downstream, Gas & Power, and Corporate and Other. The Exploration and Production segment includes contractual purchases of natural gas and purchase of crude oil arising from service contracts and concession obligations, as well as crude oil and natural gas intersegment sales. The Downstream segment involves in refining, transport, purchase of crude oil and natural gas; and marketing of crude oil, natural gas, refined products, petrochemicals, electric power generation and natural gas distribution. The Gas and Power segment includes the transportation, distribution and commercialization of natural gas to third parties, natural gas liquid, regasification services and electricity generation. The Corporate and Other segment includes corporate administrative expenses and assets, construction activities and the environmental remediation. The company was founded on June 2, 1977 and is headquartered in Buenos Aires, Argentina.

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