Galp Energia SGPS (GALP) Q4 2008 earnings summary

Executive summary

• FY08 replacement cost adjusted (RCA) net profit rose 14% YoY to €478M; stronger Refining & Marketing (R&M) results offset weaker Exploration & Production (E&P) and Gas & Power (G&P).

• Q4 RCA net profit increased 199% YoY to €125M, supported by R&M and a positive €105M time-lag effect.

Financial highlights

• FY08 revenue was €15.062B, up 20% YoY; RCA EBITDA was €975M, up 9%, and RCA EBIT was €693M, up 12%.

• FY08 RCA EPS was €0.58, up 14% YoY; associates’ contribution fell 19% to €48M.

• Q4 RCA revenue was €3.579B, up 4% YoY; RCA EBITDA reached €244M, up 36%, and RCA EBIT €179M, up 89%.

• Q4 RCA net profit was €125M versus €42M a year earlier; RCA EPS was €0.15 versus €0.05.

• FY08 IFRS net profit was €117M versus RCA net profit of €478M; the reconciliation included a €355M inventory effect and €6M of non-recurring items.

Segment performance

• E&P RCA EBIT reached €141M for FY08; net entitlement production fell 20% YoY to 3.7M bbl as higher Brent prices and early-year operational delays reduced entitlement volumes.

• R&M operating result rose 47% YoY to €373M; annual refining margin fell 19% to $4.4/bbl, while direct-customer volumes grew 3%.

• Q4 refining margin increased 24.8% YoY to $5.8/bbl; processed volumes rebounded after the Sines outage, though FCC start-up delays weighed on the benchmark spread.

• Natural gas volumes increased 5% YoY to 5.6 Bcm for FY08, with growth led by electricity and industrial sales; liberalized markets represented 57% of volume.

• Q4 regulated-market volumes grew 19% QoQ, while liberalized volumes were pressured by coal and fuel oil competition in power generation.