Financial review
Capital expenditure |
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|
|
|
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|
(€ million) |
2014 |
2015 |
2016 |
Change |
% Ch. |
Exploration & Production |
10,156 |
9,980 |
8,254 |
(1,726) |
(17.3) |
- acquisition of proved and unproved properties |
|
|
2 |
|
|
- exploration |
1,030 |
566 |
417 |
|
|
- development |
9,021 |
9,341 |
7,770 |
|
|
- other expenditure |
105 |
73 |
65 |
|
|
Gas & Power |
172 |
154 |
120 |
(34) |
(22.1) |
Refining & Marketing and Chemicals |
819 |
628 |
664 |
36 |
5.7 |
- Refining & Marketing |
537 |
408 |
421 |
13 |
3.2 |
- Chemicals |
282 |
220 |
243 |
23 |
10.5 |
Corporate and other activities |
113 |
64 |
55 |
(9) |
(14.1) |
Impact of unrealized intragroup profit elimination |
(82) |
(85) |
87 |
172 |
.. |
Capital expenditure - continuing operations |
11,178 |
10,741 |
9,180 |
(1,561) |
(14.5) |
Capital expenditure - discontinued operations |
694 |
561 |
|
(561) |
|
Capital expenditure |
11,872 |
11,302 |
9,180 |
(2,122) |
(18.8) |
Adjusted results |
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|
(€ million) |
2014 |
2015 |
2016 |
Change |
% Ch. |
Adjusted operating profit (loss) - continuing operations |
12,337 |
5,708 |
2,315 |
(3,393) |
(59.4) |
Reinstatement of intercompany transactions vs. discontinued operations |
(1,114) |
(1,222) |
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|
Adjusted operating profit (loss) - continuing operations on a standalone basis |
11,223 |
4,486 |
2,315 |
(2,171) |
(48.4) |
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|
|
|
|
Net profit (loss) attributable to Eni’s shareholders - continuing operations |
1,720 |
(7,952) |
(1,051) |
6,901 |
86.8 |
Exclusion of inventory holding (gains) losses |
1,008 |
782 |
(120) |
|
|
Exclusion of special items |
1,471 |
8,487 |
831 |
|
|
Adjusted net profit (loss) attributable to Eni’s shareholders - continuing operations |
4,199 |
1,317 |
(340) |
(1,657) |
.. |
Reinstatement of intercompany transactions vs. discontinued operations |
(476) |
(514) |
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|
|
Adjusted net profit (loss) attributable to Eni’s shareholders on a standalone basis |
3,723 |
803 |
(340) |
(1,143) |
.. |
Tax rate (%) |
65.9 |
82.4 |
120.6 |
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|
Summarized Group Balance Sheet
The Summarized Group Balance Sheet aggregates the amount of assets and liabilities derived from the statutory balance sheet in accordance with functional criteria which consider the enterprise conventionally divided into the three fundamental areas focusing on resource investments, operations and financing. Management believes that this summarized Group Balance Sheet is useful information in assisting investors to assess Eni’s capital structure and to analyze its sources of funds and investments in fixed assets and working capital. Management uses the summarized group balance sheet to calculate key ratios such as the proportion of net borrowings to shareholders’ equity (leverage) intended to evaluate whether Eni’s financing structure is sound and well-balanced.
Summarized Group Balance Sheet |
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(€ million) |
December 31, 2015 |
December 31, 2016 |
Change |
Fixed assets |
|
|
|
Property, plant and equipment |
68,005 |
70,793 |
2,788 |
Inventories - Compulsory stock |
909 |
1,184 |
275 |
Intangible assets |
3,034 |
3,269 |
235 |
Equity-accounted investments and other investments |
3,513 |
4,316 |
803 |
Receivables and securities held for operating purposes |
2,273 |
1,932 |
(341) |
Net payables related to capital expenditure |
(1,284) |
(1,765) |
(481) |
|
76,450 |
79,729 |
3,279 |
Net working capital |
|
|
|
Inventories |
4,579 |
4,637 |
58 |
Trade receivables |
12,616 |
11,186 |
(1,430) |
Trade payables |
(9,605) |
(11,038) |
(1,433) |
Tax payables and provisions for net deferred tax liabilities |
(4,137) |
(3,073) |
1,064 |
Provisions |
(15,375) |
(13,896) |
1,479 |
Other current assets and liabilities |
1,827 |
1,171 |
(656) |
|
(10,095) |
(11,013) |
(918) |
Provisions for employee post-retirement benefits |
(1,123) |
(868) |
255 |
Discontinued operations and assets held for sale including related liabilities |
9,048 |
14 |
(9,034) |
CAPITAL EMPLOYED, NET |
74,280 |
67,862 |
(6,418) |
Eni shareholders’ equity |
55,493 |
53,037 |
(2,456) |
Non-controlling interest |
1,916 |
49 |
(1,867) |
Shareholders’ equity |
57,409 |
53,086 |
(4,323) |
Net borrowings |
16,871 |
14,776 |
(2,095) |
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY |
74,280 |
67,862 |
(6,418) |
The Summarized Group Balance Sheet was affected by the movement in the EUR/USD exchange rate, which determined an increase in net capital employed, total equity and net borrowings by €1,747 million, €1,198 million, and €549 million respectively. This was due to translation into euros of the financial statements of US-denominated subsidiaries reflecting a 3.2% depreciation of the euro against the US dollar (1 EUR= 1.054 USD at December 31, 2016 compared to 1.089 at December 31, 2015).
Fixed assets (€79,729 million) increased by €3,279 million from December 31, 2015. The item “Property, plant and equipment” was up by €2,788 million mainly due to capital expenditure (€9,180 million), positive currency movements and net asset impairments reversals (€475 million). These positives were offset by DD&A (€7,559 million), the write-off of exploration projects lacking the criteria for continuing to be capitalized and the write-off of the damaged units of the EST plant in Sannazzaro refinery (€350 million). The increase in the item “Equity-accounted investments and other investments” of €803 million was due to the recognition as an equity-accounted investment of the stake of 30.55% retained in Saipem following loss of control over the former subsidiary and the pro-quota share capital increase of Saipem subscribed by for an overall amount of €1,614 million, net of losses incurred in the period.
Net working capital was in negative territory at minus €11,013 million and decreased by €918 million y-o-y driven by reduced trade receivables, due to better management of working capital and higher volume of trade receivables due beyond end of the reporting period which were transferred to factoring institution, as well as increased trade payables. Other current assets and liabilities decreased due mainly to the impairment of certain receivables in the E&P segment owed by certain NOCs, due to the expected outcome of ongoing negotiations in relation to under-lifting position.
These negatives were partly offset by the decrease in tax payables and provisions for deferred taxes, reflecting lower provisions for current tax, driven by the reduction of taxable profit and E&P utilization of deferred tax liabilities relating to the impairment of under-lifting receivables, as well as the reduction in the risk provisions for the fulfilment of obligations.
Discontinued operations, assets held for sale including related liabilities (€14 million) decreased by €9,034 million due to the closing of the Saipem transaction and the divestment of fuel distribution activities in Eastern Europe.
Shareholders’ equity including non-controlling interest was €53,086 million, down by €4,323 million from December 31, 2015. This was due to the net loss of the year (€1,457 million), the de-recognition of Saipem non-controlling interest (€1,872 million), as well as dividend distribution and other changes of €2,885 million (including the 2015 balance and the 2016 interim dividends paid to Eni’s shareholders amounting to €2,881 million). These effects were partially offset by a positive change in the cash flow hedge reserve (€883 million) and positive foreign currency translation differences (€1,198 million).
Summarized Group Cash Flow Statement
Eni’s Summarized Group Cash Flow Statement derives from the statutory statement of cash flows. It enables investors to understand the link existing between changes in cash and cash equivalents (deriving from the statutory cash flows statement) and in net borrowings (deriving from the summarized cash flow statement) that occurred from the beginning of the period to the end of period. The measure enabling such a link is represented by the free cash flow which is the cash in excess of capital expenditure needs. Starting from free cash flow it is possible to determine either: (i) changes in cash and cash equivalents for the period by adding/deducting cash flows relating to financing debts/receivables (issuance/repayment of debt and receivables related to financing activities), shareholders’ equity (dividends paid, net repurchase of own shares, capital issuance) and the effect of changes in consolidation and of exchange rate differences; and (ii) change in net borrowings for the period by adding/deducting cash flows relating to shareholders’ equity and the effect of changes in consolidation and of exchange rate differences. The free cash flow and net cash provided by operating activities from continuing operations on a standalone basis are non-GAAP measures of financial performance.
Summarized Group Cash Flow Statement |
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(€ million) |
2014 |
2015 |
2016 |
Change |
Net profit (loss) - continuing operations |
1,808 |
(7,399) |
(1,044) |
6,355 |
Adjustments to reconcile net profit (loss) to net cash provided by operating activities: |
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|
|
|
- depreciation, depletion and amortization and other non monetary items |
10,898 |
17,216 |
7,773 |
(9,443) |
- net gains on disposal of assets |
(224) |
(577) |
(48) |
529 |
- dividends, interests, taxes and other changes |
6,600 |
3,215 |
2,229 |
(986) |
Changes in working capital related to operations |
2,199 |
4,781 |
2,112 |
(2,669) |
Dividends received, taxes paid, interests (paid) received during the period |
(6,812) |
(4,361) |
(3,349) |
1,012 |
Net cash provided by operating activities - continuing operations |
14,469 |
12,875 |
7,673 |
(5,202) |
Net cash provided by operating activities - discontinued operations |
273 |
(1,226) |
|
1,226 |
Net cash provided by operating activities |
14,742 |
11,649 |
7,673 |
(3,976) |
Capital expenditure - continuing operations |
(11,178) |
(10,741) |
(9,180) |
1,561 |
Capital expenditure - discontinued operations |
(694) |
(561) |
|
561 |
Capital expenditure |
(11,872) |
(11,302) |
(9,180) |
2,122 |
Investments and purchase of consolidated subsidiaries and businesses |
(408) |
(228) |
(1,164) |
(936) |
Disposals of consolidated subsidiaries, businesses, tangible and intangible assets and investments |
3,684 |
2,258 |
1,054 |
(1,204) |
Other cash flow related to capital expenditure, investments and disposals |
435 |
(1,351) |
465 |
1,816 |
Free cash flow |
6,581 |
1,026 |
(1,152) |
(2,178) |
New borrowings (repayment) of long-term finance debt |
(414) |
(300) |
5,271 |
5,571 |
Changes in short and long-term financial debt |
(628) |
2,126 |
(766) |
(2,892) |
Dividends paid and changes in non-controlling interests and reserves |
(4,434) |
(3,477) |
(2,885) |
592 |
Effect of changes in consolidation, exchange differences and cash and cash equivalent related to discontinued operations |
78 |
(780) |
(3) |
777 |
NET CASH FLOW |
1,183 |
(1,405) |
465 |
1,870 |
Net cash provided by operating activities on a standalone basis |
13,544 |
12,155 |
7,673 |
(4,482) |
Change in net borrowings |
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|
(€ million) |
2014 |
2015 |
2016 |
Change |
Free cash flow |
6,581 |
1,026 |
(1,152) |
(2,178) |
Net borrowings of acquired companies |
(19) |
|
|
|
Net borrowings of divested companies |
|
83 |
5,848 |
5,765 |
Exchange differences on net borrowings and other changes |
(850) |
(818) |
284 |
1,102 |
Dividends paid and changes in non-controlling interest and reserves |
(4,434) |
(3,477) |
(2,885) |
592 |
CHANGE IN NET BORROWINGS |
1,278 |
(3,186) |
2,095 |
5,281 |