Enel Jumps Most in Two Months on Boost From Italian Retail Unit

  • First quarter adjusted net income beats analyst estimates
  • Weaker wholesale energy costs lift retail profit margins

Enel SpA climbed the most in more than eight weeks in Milan trading as profit from supplying households with energy in Italy increased in the first quarter.

Profit margins for the utility’s retail business improved to about 10 percent as the cost of buying energy in wholesale markets fell, Alberto de Paoli, Enel’s chief financial officer, said on a call Tuesday. Earnings before interest, tax, depreciation and amortization for the Rome-based company’s Italian retail unit climbed 35 percent in the three months through March, according to figures published Monday.

Enel posted first-quarter adjusted net income of 795 million euros ($904 million) that beat analyst estimates, and confirmed its 2016 dividend of at least 0.18 euros. The utility said it’s on track to meet all of its targets including a 4 percent increase per year in Ebitda through 2019. Enel cut its net debt by 2.4 percent in the three months through March to 36.6 billion euros.

“Overall, this is a strong set of results, which shows that, despite fears regarding the impact of the drop in wholesale prices in Italy and Iberia and the macro evolution in LatAm, the strategy of Enel is working,” said Cosma Panzacchi, an analyst at Sanford C. Bernstein Ltd. “Its business mix protects it in the current scenario better than most European utilities.”

Shares rose as much as 3.8 percent, the biggest intraday jump since March 10, before trading up 3.4 percent at 4.024 euros by 12:38 p.m. Rome time.

Retail Sales

Ebitda at Enel’s Italian retail unit jumped to 560 million euros, while global retail earnings rose 32 percent to 710 million euros, according to figures published Monday.

“We think the achieved spike in margins is difficult to keep at these levels,” de Paoli said. “Long term it will depend on competition in the different countries, price levels and the way our companies are able to reduce overall costs.”

Italy’s average year-ahead power price slid 19 percent in the first quarter from a year earlier, according to data from the European Energy Exchange AG.

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