With the FY 2022 results of Romanian companies now out, we decided to take a look at how profitable were the Romanian energy companies during the year, by taking a look at the EBITDA and net profit margins.
2022 turned out to be quite eventful year for the energy sector in general. Companies in the oil&gas business, including extraction, transportation, and refinement greatly benefitted. Given the scope of the situation in 2022 however, there was enough room for other companies not directly involved in the fossil fuel business, such as Electrica with its electricity transportation infrastructure, and Nuclearelectrica with its nuclear reactors to also benefit.
Romania is quite specific in this case, as compared to other countries in the region, most notably Croatia & Slovenia, they have 6 energy sector companies in their main index, BET, meaning that almost a third of the index is composed of them. As such, 2022 could be described as the year of the energy sector. This is also due to the fact that in the preceding years, there was a reduction in investment into new infrastructure and drilling sites, especially when it comes to fossil fuel extraction and processing. This was somewhat mitigated by higher investments in renewable energy sources, but this was still not enough to compensate for the reduction. Lastly, the COVID-19 pandemic meant that in general companies invested less.
So having all of this in mind, how profitable were the Romanian energy companies in 2022?
EBITDA margins of Romanian energy companies (2022 vs. 2021, %)
Source: Companies’ data, InterCapital Research
Looking at the graph above, we can see that Nuclearelectrica was the most profitable company, at least when it comes to the EBITDA margin. In 2022, they managed to achieve an EBITDA margin of 55.72%, which is a reduction of 0.18 p.p. YoY. This is to be expected, for several reasons. First of all, Nuclearelectrica is a majority state-owned company, which uses fuel whose price did not experience the strong price fluctuations that oil&gas did. As such, their operating expenses did not experience such a significant increase, outside extraordinary items. In this case, this would refer to all the taxes/royalties/solidarity contributions, as Romania has a law that says all energy companies are to be taxed at higher levels after a certain price point, meaning that their profitability is effectively capped. This is the main reason why Nuclearelectrica experienced a decrease in profitability, as their revenue grew but was taxed at higher levels, leading to slightly lower profitability. Next up we have Transgaz, which recorded an EBITDA margin of 43.09%, an increase of 1.85 p.p. YoY, and Transelectrica, which recorded an almost doubling of its EBITDA margin, from 19.77% to 37.61%, an increase of 17.84 p.p. YoY. Following them, we have OMV Petrom with an EBITDA margin of 27.88%, an increase of 0.55 p.p. YoY, Romgaz, with an EBITDA margin of 26.34%, a decrease of 21.23 p.p. YoY, and finally, Electrica, with an EBITDA margin of 13.62% (2021: -1.78%).
Romgaz’s story in particular is interesting here, as we can see the direct effect of the higher gas prices, but also the higher taxes on those prices. As such, even though Romgaz recorded more than a doubling in revenue growth (+129% to be exact), its EBITDA only increased by 26.6% YoY, leading to the aforementioned drop in profitability.
Net profit margins of the Romanian energy companies (2022 vs. 2021, %)
Source: Companies’ data, InterCapital Research
Like with the EBITDA margin, Nuclearelectrica also recorded the highest net profit margin, at 42.9%. This represents an increase of 9.62 p.p., meaning that despite the overall “flat” EBITDA margin, Nuclearelectrica’s bottom line increased significantly, indicating that the higher expenses were already felt on the EBITDA line and had a reduced effect on the net profit (the solidarity contribution which taxes revenue above the certain point at 100% is booked as part of the operating expenses and not as a direct tax, something that would affect the net profit and not EBITDA). Next up, we have Transgaz, which recorded a net profit margin of 25.8%, representing an increase of 10.6 p.p. YoY, and Transelectrica, with a net profit margin of 22.84%, an increase of 22.81 p.p. YoY. On the other hand, the only company to experience a drop in profitability was Romgaz, whose net profit margin decreased by 13.7 p.p. to 19.02%.
