LucaMeer @LucaMeer: "PART 1 The analysis of the..."

Italy

PART 1 The analysis of the FY24 of the Hera Group will be divided into two parts, as it was very long. This is the first part. Dear investors, today we are talking about $HER.MI (Hera SPA) 's 2024 annual results. NOTE: for Italian companies, Mol (margine operativo lordo - gross operating margin) is considered, which is equivalent to EBITDA for foreign companies (in particular in the United States). For this reason, for the sake of simplification, I will use (as the Hera Group also does in many of its communications) the term EBITDA instead of MOL. I will use this indicator provided for by Italian law, only for the NFP/MOL that you will find analyzed later in the post and to show the contribution of the various segments in which the multi-utility operates to the achievement of the important result obtained relating to this indicator. TOTAL REVENUES Represents the total amount generated from the sale of goods/services. 2023: €14,897.3 mln 2024: €12,889.7 m The main reasons for this 15.9% decrease are to be found in the decrease in the price of commodities and the cessation of activities related to the superecobonus. For those who don't know, this bonis is a tax transfer linked to energy efficiency and anti-seismic works. EBITDA ADJUSTED EBITDA measures profitability, but also considering D&A (depreciation & amortization), interest expense and taxes. It shows how much the company earns from its activities and is useful for comparing companies with different levels of debt to each other. 2023: €1,494.7 m 2024: €1,587.6 m Of this, 63% is generated by the free market, while 37% by the regulated market. - Regulated market: prices and conditions are set by the regulatory authority, ARERA in Italy. It offers stable, but limited revenues. - Free market: companies that provide services independently define prices and conditions, in competition with each other. It offers greater earning potential, but they are more volatile. The free market is dominant for the electricity and gas segments, while for water there is only the regulated market. This result places the Hera Group in second place in the reference benchmark, which also consists of the other three main national multi-utilities ( $A2A.MI (A2A Group) , $ACE.MI (ACEA S.p.A.) , $IRE.MI (Iren) ). NET INCOME Represents the total amount earned by a company after all costs, expenses, and taxes have been deducted from total revenue. 2023: €483.2 m 2024: €535.9 mln The result places the Group in second place in the Benchmark. As can be seen, net income increased despite a decline in Total Revenues. This result was achieved thanks to some important financial and tax factors: 1. EBITDA has increased, which means greater efficiency in operating costs; 2. The drop in energy prices has also led to a drop in the cost of raw materials for multi-utility, which have decreased more than the corresponding decrease in revenues, this has led to higher margins between sales price and procurement cost; 3. The Hera Group made lower provisions for risks in 2024 compared to the previous year; 4. Debt renegotiation: taking advantage of falling rates, it has refinanced debt at lower costs; 5. Lower tax rate with a consequent increase in net income; 6. Expansion in services with higher profit margins. NET DEBT Represents the difference between total financial debt (current and non-current) and available liquidity (including cash equivalents, i.e., assets easily and quickly convertible into cash). 2023: €3,827.7 mln 2024: €3,963.7 m The increase is mainly due to the growth in investments and M&A transactions, among which the main one was the acquisition of 70% of TRS Ecology through the subsidiary Heramniente. This is a company that treats industrial waste and has about 2,700 customers and less than 100 employees in its portfolio. This transaction is expected to contribute ~€7 m to EBITDA, in addition to the value of the expected synergies. In addition, with this transaction, Hera strengthens its presence in the North-West of Italy. The panorama of services managed by multi-utilities in Italy is still very fragmented and these operations could be positive not only for the added value they can bring to the Group, but also for the establishment of "giants" in the sector, thus making the management of resources and services more efficient, obviously always respecting the legal limits for the Antitrust.

4 Mentioned

HER.MI

A2A.MI

ACE.MI

IRE.MI

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