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    NTGY   ES0116870314

NATURGY ENERGY GROUP, S.A.

(NTGY)
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Naturgy trims earnings growth forecast as power prices squeeze margins

11/10/2021 | 06:23am EST
FILE PHOTO: The logo of Spanish energy company Naturgy at its headquarters in Madrid

MADRID (Reuters) - Spanish gas and power group Naturgy trimmed its 2021 earnings forecast on Wednesday after reporting a boost from rebounding power demand and higher prices for gas globally that was offset by lower margins on electricity in Spain.

It forecast full-year ordinary EBITDA, not including extraordinary items, of 3.8-3.9 billion euros ($4.4-5 billion) - an increase on its 3.7 billion euros last year but lower than previous guidance for as much as 4 billion euros.

A combination of low inventories, demand to fuel post-pandemic economic recoveries and tighter supplies from Russia have pushed gas prices higher this year.

This boosted margins in Naturgy's international gas business but contributed to higher wholesale electricity prices at home in Spain, weighing on its power supply business.

However, the company said the volatile third quarter should not be seen as an indication of the outlook for the rest of the year.

"Results were impacted by some of the contracts to our final customers in gas and electricity that do not reflect substantial increases in gas and electricity procurement costs," global head of controlling Jon Ganuza told analysts on a conference call.

Shares fell 1.3% by 1050 GMT.

Meanwhile, an expansion of the Medgaz pipeline that brings gas from Algeria to Spain will be completed by the end of the year, Naturgy said, adding this meant the end of a contract to use another via Morocco would not impact security of supply.

Ganuza said Naturgy was talking to Algeria and Morocco about a potential extension to the Maghreb-Europe concession anyway.

"It is something that would be sensible for all," Ganuza said, but he added that the end of the contract was known about well in advance so "we do not need those volumes currently for this winter".

He said the company's "base case scenario" was failing to meet a satisfactory agreement with the two other countries, who have severed diplomatic ties.

"If we were to be able to reach any agreement with Algeria that would be at most an upside," Ganuza said.

With its roots in gas lighting in Barcelona in the 1840s, Naturgy has become a major trader of natural gas and is now trying to shift to low-carbon energy sources seen as vital to reducing planetary warming.

In the longer term, it aims for annual ordinary core earnings of around 4.8 billion euros in 2025.

(Reporting by Isla Binnie; Editing by Alexander Smith and Keith Weir)

By Isla Binnie


© Reuters 2021
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Financials
Sales 2021 16 572 M 18 478 M 18 478 M
Net income 2021 1 151 M 1 283 M 1 283 M
Net Debt 2021 11 664 M 13 005 M 13 005 M
P/E ratio 2021 25,1x
Yield 2021 4,27%
Capitalization 27 204 M 30 365 M 30 333 M
EV / Sales 2021 2,35x
EV / Sales 2022 2,20x
Nbr of Employees 7 627
Free-Float 35,5%
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Mean consensus UNDERPERFORM
Number of Analysts 20
Last Close Price 28,31 €
Average target price 22,34 €
Spread / Average Target -21,1%
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Managers and Directors
Francisco Miguel Reynés Massanet Chairman & Chief Executive Officer
Carlos Ayuso Salinas Director-Internal Audit, Compliance & Control
Ramón Adell Ramón Independent Director
Francisco Belil Creixell Independent Director
Helena Herrero Starkie Independent Director
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