Earnings call transcript: Achia Group sees strong Q1 2025 growth amid strategic investments

Achia Group reported robust financial performance for the first quarter of 2025, driven by strategic investments and operational efficiencies. The company’s revenues increased by 8% year-over-year to $344 million, with recurring revenues up by 76%. According to InvestingPro data, the company maintains a GOOD financial health score of 2.5, supported by strong profitability metrics. Despite a negative cash flow of €127 million, the company maintained stable financial metrics, including a net debt to EBITDA ratio of 2x. Achia’s stock price saw a slight dip of 0.59%, closing at $20.36, as the market digested the earnings report.

Key Takeaways

• Achia Group’s Q1 2025 revenues rose by 8% year-over-year.
• EBITDA increased by 193% compared to the previous quarter.
• Significant investments in regulated businesses and renewable energy.
• Cash flow remained negative, but financial stability was maintained.
• Stock price decreased slightly by 0.59% following the earnings release.

Company Performance

Achia Group demonstrated strong performance in Q1 2025, highlighted by significant revenue growth and a substantial increase in EBITDA. The company’s strategic focus on regulated businesses and renewable energy investments contributed to this positive outcome. Despite the negative cash flow, Achia maintained its financial stability, reflecting its ability to manage debt effectively.

Financial Highlights

• Revenue: $344 million, up 8% year-over-year
• EBITDA: Increased by 193% from the previous quarter
• Net Profit: Up 3% compared to Q1 2024
• Cash Flow: Negative €127 million
• Net Debt to EBITDA Ratio: Stable at 2x

Market Reaction

Achia Group’s stock experienced a slight decline of 0.59% in the immediate aftermath of the earnings announcement, closing at $20.36. InvestingPro analysis indicates the stock has shown strong momentum, with a 21.56% return over the past six months and a 15.51% gain year-to-date. Based on InvestingPro’s Fair Value analysis, the stock appears to be trading near its fair value. This movement places the stock closer to its 52-week low of $14.82, amid broader market trends and investor sentiment. The market’s reaction reflects a cautious stance as investors assess the implications of the company’s financial results and strategic plans.

Outlook & Guidance

Achia Group remains optimistic about its future prospects, maintaining its EBITDA growth guidance for 2025. The company anticipates a normalized EBITDA growth of 7%, driven by continued investments in electricity networks and renewable energy. InvestingPro data shows the company generated $372.73M in EBITDA over the last twelve months, with analysts forecasting continued profitability for 2025. However, potential margin pressures in its commercial business and pending regulatory details on electricity grid concessions may pose challenges. For deeper insights into Achia’s growth prospects and comprehensive analysis, subscribers can access the detailed Pro Research Report, available exclusively on InvestingPro.

Executive Commentary

Pierre Francesco Rani, CFO, emphasized the importance of investing in electricity networks, stating, "Investing in electricity networks can no longer wait." He also highlighted the strategic significance of the Aqueduct of Pesquera project, calling it "the biggest strategic investment for this country."

Risks and Challenges

• Potential margin pressures in the commercial business due to competitive dynamics.
• Regulatory uncertainties related to electricity grid concessions.
• Negative cash flow impacting financial flexibility.
• Macroeconomic factors, such as interest rate fluctuations and energy price volatility.
• Execution risks associated with large-scale projects like the WTE Rome Project.

Q&A

During the earnings call, analysts inquired about the potential for concession extensions and their impact on Achia’s long-term strategy. The company expressed a positive outlook but noted that regulatory details are still pending. Additionally, questions regarding working capital normalization and potential mergers and acquisitions in gas distribution were addressed, with the company indicating a focus on synergies and strategic fit.

Full transcript - ACEA (ACE) Q1 2025:

Conference Operator, Chorus Call: Ladies and gentlemen, good evening. This is the Chorus Call conference operator. Welcome and thank you for joining our conference call of Achia Group for the presentation of results as of the 03/31/2025. As a reminder, all participants are in listen only mode. After the presentation, there will be an opportunity to ask questions.

I would like to give the floor to Mr. Redario Meeki, Head of Investor Relations of Acheya. Ladies and gentlemen, good afternoon, and welcome to the presentation of the results of the first quarter of twenty twenty five of Achen. Now I have here with me the CFO, Mr. Francesco Ragni, and I have the Head of Control.

They will go through the presentation with me. At the end of the presentation, there will be a Q and A session. I’ll give the floor to Mr. Pierre Francesco Rani, CFO of the group. Ladies and gentlemen, good afternoon to you all.

We’ll start the presentation by starting with an overview of the regulatory and market environment Versus what we said in March, let me highlight that in the water business, over and above the approval of the Arraya tariffs. We also have the approval of the integrated system of tariffs. As to Grids, provisional tariffs will be approved or expected to be approved by the end of this month. And then again, for the electricity production, now Arira has reevaluated RAB. That is from 2025 tariffs, it is possible to adopt the Italian EPCA, which has been calculated for Italy.

And the review of tariffs for 2024 because of the review of Tariffs 2022 of IPCA as to commodity prices. Now the price of electricity and gas in Q1 twenty twenty five have recorded a strong increase versus the previous year. There is plus 50% and plus 60%, respectively. At the March, the long term rates are about 2.5%, which are going down versus the previous year. Now the dynamic is due to the decrease of rates of the ECB that started in June and which proceeded in the first quarter of this year.

Let me now go on to present the dates of 2025. Revenues, $344,000,000, up 8% versus the first quarter of Q1 and plus 76% to 7% versus the recurrent results of last year. Now the result has been adjusted because of the approvals of the MT4 tariffs. The also because of the downside of Terni WTE. And then the EBITDA contribution is due to all of the business units.

Now EBITDA up to by 193% versus the previous quarter or the quarter of the first quarter of twenty twenty for Now the cash flow is negative by €127,000,000 which has allowed us to maintain a solid financial structure with a net debt to EBITDA, which is stable versus the data of 2024. As to the overview of Q1 twenty twenty five results, the next slide, let me point out that the EBITDA in Q1 twenty twenty five grew by 7% versus 2024 adjusted by one offs and perimeter changes. CapEx, $242,000,000 equal to those of last year and investments overall go up to EUR $262,000,000 in the quarter. Net profit up 3% versus Q1 twenty twenty four, thanks to the operating performance and to the amortization of regulated business because of the growth of RAB. The net financial position, up EUR 123,000,000 versus 2024.

The net debt to EBITDA ratio is stable at 2x. Now thanks to the results obtained in Q1, we confirm the guidance of 2025 that we announced in May when we present the results of 2024. Now let me go on to show you the EBITDA for Q1. Now in Q1, we had an organic growth of 24,000,000 versus the 2024 recurring data because of four items: the growth of water tariffs the improving of the commercial margin, which is due to the improvement of unit margin and the growth of public lighting because of the investments that we have made and the operating efficiency and then the contribution of the production because of increase of volume produced, hydroelectric and photovoltaic. Now let’s see that on the right of the slide, you see the one offs and the change of perimeter in versus 2024, which amounted to €3,000,000 3 factors.

Now 15,000,000 positive, the retroactive application of the tariff update relating to the MTI4 regulation, which were accounted for in Q3 twenty twenty four. The consolidation at equity of Acuador to the Fiora, minus €15,000,000 and the shutdown for revamping of the attorney, WTE, three million euros. As to the net profit, now the, net profit went up, by 3,000,000 versus, the same period of last year. This is due to the growth of EBITDA, which accounted for the amortizations made in the year. As for the EBITDA, on the right of the slide, you see the details of nonrecurring events in Q1 twenty twenty four, which amounted to EUR 12,000,000, which is related to the retroactive application of the tariff update related to the MTI four regulation, 10,000,000 and EUR 2,000,000 positive downtime for revamping the WTE plant.

As to CapEx, in Q1, as I said before, we invested EUR $262,000,000, 6 percent up versus 2024. Such investments, 92% are accounted for by the regulated businesses of water, grids and environment. Now out of $262,000,000 of CapEx, 20,000,000 are financed by public interventions, all of them in the water business. Without such contributions, the CapEx would have been EUR $242,000,000 stable versus last year. In the slide, you see the different initiatives taken in the different sectors.

For instance, in the water business, the interventions on purification system and in the grid, the strengthening and the upgrade of the grid. As to the cash flow of Q1, now the cash absorption in the quarter amounted to €163,000,000 now, which is affected then negatively to the working capital relating to commercial events related to CapEx, which went up in Q4 twenty twenty four, as we said in the presentation of March. Moreover, we recorded a long an increase of long term credits, regulatory credits in the water business and grids. And then let’s move on to the financial structure. Next slide, The average cost of debt as of March 31 is 2.1%, which is in line with the period of 2024, which was related also to the consolidation equity of Acudato del Fiora.

And then variable floating rate is 11% of our debt exposure, And this is made up for the interest rate on the debt, which is lower than the debt, which is maturing in 2024. We reimbursed €300,000,000 within the EMTM program. And in February, we reimbursed a loan, which was issued in March 2010. Moreover, now within the financing that we had in 2024, ’10 millions in February, we subscribed to long term financing with the European Investment Bank, EUR one hundred and eighty million, one direct financing, 120,000,000 and one with the Sacha guarantee for the remaining EUR 55,000,000. Let me now move on to give you the overview of the different business lines.

The business the water business in Italy in Q1 twenty twenty four were recalculated to get the tariffs adjusted. Now in q one twenty twenty four, the data did not include the adjustment of tariffs and then also did include the accrued oil figure that’s now posted at equity. So you can see water business revenues plus 6%, which is due to tariff growth and investments that we made net of public contributions. CapEx go down by EUR 22,000,000, and this is due to different interventions planned versus last year. We intend to recover what was done in Q1 going forward.

As Grids and Public Lightning, despite the reduction of WACC by 40 basis points, the EBITDA grows by 2% to EUR 107,000,000. And this is mainly due to investments made and therefore, to the growth of RAB and to because of the improvement of RAB starting in 2025. Now for the movement from the Istad index to the IPCA index, CapEx growing by EUR 27,000,000, plus 47%, thanks to the upgrade of the grid. As to the environment, net of one offs due to the nonavailability of the attorney WTE because of the shutdown for revamping, the EBITDA is growing by EUR 1,000,000, that is 6% versus Q1 twenty twenty four, thanks to the increasing margins of the WTE CapEx have been down by €2,000,000 because of the revamping operations on the WTE of turning in Q1 twenty twenty four. As to the generation, Slide number 14, EBITDA is growing by EUR 7,000,000, which is due to the more favorable energy scenario and greater production of the hydroelectric and photovoltaic business.

Let me remind you that last year, we exploit the decrease of volumes because of the lack of raining in Abruzzo. Now energy produced has grown by 18% from 174 to 200 gigawatt hour, thanks to the greater hydroelectric output and photovoltaic output. Now as to the photovoltaic energy versus the same quarter of last year, We have 155 megawatt versus 102 megawatts CapEx going down by SEK 2,000,000 versus the same quarter last year because of the change in interventions program versus same period last year. As to the commercial business, the EBITDA in Q1 twenty twenty five went up by EUR 7,000,000, plus 16%. And this is due to the greater margins on the free market and the growth of customers, 90,000 customers more in the electric business and 65,000 customers more in the gas business.

CapEx are stable year on year, that is EUR 15,000,000. Now this is the end of the presentation. Thank you very much for your attention. We can now open the Q and A session. Thank you very much.

This is the Chorus Call operator. I would like to start now the Q The first question is from Javier Suarez from Mediobanca. Now good evening, good evening to you all. I have two or three questions to ask. First of all, a context related slide.

Can you please share with us your expectations about the process related to extending the useful life of concessions for electricity distribution in Italy. I would like to know what are information you have on the process and the impact on Achea. I would like to know what kind of expectations also you have about the future concessions in Italy for electricity and what implications this might have in your company? Second question about the working capital absorption that we have seen in Q1 of €200,000,000 Could you please tell us give us an indication about the working capital absorption by the end of the year? And how the dynamic of Q1 compared to Q1 of last year?

Last question about the guidance that you gave us in March, ’2 ’3 percent on EBITDA growth in Q1, much higher than that. Now do you think the guidance is conservative? Or are there factors that we take into account that might split up the data that you give us for Q1? Thank you very much. Thank you very much, Javier.

Let’s start from your question about the concessions in the electricity business. We, as all operators in the industry, we are with for the indications of our era and from the Ministry of Economy and Finance. Give us indications about the concessions related process and the process that should come to an end in June year, and then we will understand how we can access and and we can. Now certainly, for Achiev, the extension to twenty years of concession are mainly low to mid voltage networks is very important. This is the business which after the water business is the most important one.

Let me also remind you what happened in Spain, the electricity blackout, which lasted more than one day, and we share had a strong impact on the two, if not three. And it is quite clear that investing in electricity networks can no longer wait. We are in situation now where electricity consumption are going to increase. Therefore, the routes are to be. So as far as Achia is concerned, the methods used to extend by twenty years the concession and the amounts requested as far as ACCI is concerned, we see no problem to be part of such important program so as to be able to guarantee something that which is important, the efficiency and resiliency of the grades.

But as I told you, we are waiting for further details from the authorities. And at that point, you know, we shall tell you how we are going to approach that opportunity, which is an opportunity for us. As for hydroelectric concessions, now let’s start from. There has been recently three tenders for hydroelectric concessions, and we submitted our bid to these tenders. Now a few months have announced that we have been a bidding to the second stage second stage, but we are still waiting for the service conference for the technical details.

These are usually very long processes. Now the hydroelectric business is an area where we are present, although in a limited manner, our plans. But if there are opportunities, we can assess such opportunities as we always do in terms of investments in infrastructures for the production of energy. Now let’s now move on to the question about the networking capital from now to the end of the year. Going forward, in the next quarters, we expect a further absorption of net working capital to make up for the improvement that we’ve seen in the last quarter of twenty twenty four.

But there will be a normalization by the end of the year when we expect a neutral dynamic. There is a neutral change in the net working capital as to the peak of absorption of net working capital in Q1 twenty twenty five. This is related mainly to two factors. First of all, the payment of CapEx that were accounted for in Q1 twenty twenty four, which generated a positive networking factor, which we disclosed in March. And then greater commercial receivables.

And however, the monetary effect will be seen going forward. As to the question about the guidance, now today, we are disclosing the EBITDA regarding normalized 7%, which is the share of 3%. In this moment, we are not going to review the virus. We are going to confirm this in the next quarter. So there will be a factor that will negatively affect the progression of the data.

First of all, the progression of the have seen a few growth of that in Q1 that will be reabsorbed going forward in May, which will reabsorb the growth in Q1. There is also an issue on margins for the commercial business. It is quite clear that results are very good results. What we see on the market, there is a strong and increasing competitive pressure. The entry, for instance, of new operations, which are acquiring quite large customer base.

And then you need to take into account our operating costs related to operations and do not have a linear dynamics. So in the next course of the year, there will be higher operating costs. So I think I answered all of the questions, yes. Well, thank you very much for your answers. Yes, you answered all my questions.

The next question, Francesco Sala with Bank of Now good evening to you all, thank you very much. We really appreciate you to ask questions. Have a question about margins. You said that there is a pressure on margins. Can we see going forward, at least in the next months, let’s say, Q2 in line with the Q1?

Or whether we are going to see a reduction of the margins in Q2 already? Second question about the WTP. Now the tender has been awarded. Can you give us an update about the incinerator and what we can expect going forward? That is when the is going to be completed.

And then an update of the mark to market of Wakka for the water and electricity business. What are you seeing in this moment? And do you expect any variations going forward, any change going forward? Now as to commercial margins, the question was about commercial margins. We don’t have the figures of Q2 as yet, but we expect, as I said before, we expect a reduction of margins or a growth which is not really seen yet to do it at Q1 already in Q2.

As to the WTE in Rome, the tender was awarded on the May 5 to a number of companies, including. The main concession was our as we said, this is an investment of around €1,000,000,000 is a concession, I think, thirty three years. Now we are going to start the preliminary to supply or to provide the works, which should be completed by the end of this year. Now the project is going to be financed by project financing. And as we said different times, the WPE is not going to be consolidated within the actual numbers because we do not have the

There’s going to be a joint control with the other partners. And would like to be there with us where we will do concession. Now as to the of the excess the business, The threshold is 30 basis points, which has not been. And therefore, our estimate remain at 5.7 As to the work at the moment, we cannot make any or give you any forecast about the evolution of work because there are water risk premium, which are not related to measurable parameters. Thank you.

Now the next question by Emmanuel Oggione with the. Thank you. Thank you very much. I have a question about the process related to the renewal of concessions for electricity distribution. The anti trust authority yesterday gave negative opinion on the automatic renewal.

I’d like to know your opinion about this, get an opinion on the part of the antitrust authority and what kind of implications this has? Or do you believe that this has no risk related to this and government is going to extend nonetheless, it is I should say, by twenty years. The second question is about gas distribution. Are not very much present in this field. And I’d like therefore to know whether you might be interested in acquiring the assets of gas distribution.

I am referring to those assets which are going to sold following the merger of Ipanaso? Or conceptually speaking about this, are you open to any opportunity? I mean, conceptually speaking, are you open to make investments in the gas distribution business or are you not interested in this? And then I have a question on the business plan update. When are you going to update your business plan?

And then if I may, I’d like to ask a question about the Aqueduct Of Pesquera. In the press release, you mentioned that, that aqueduct has been has received the go ahead. Now within the current business plan, you have less than 100,000,000 of CapEx. Now to what extent this project is included within your CapEx? And what about the project development itself?

Can you give us some indications about this? Now as to electricity concessions, I’m not going to make any comments about the opinion of the authority. It’s just beyond our business. I just confirm what I said before, the extension of concessions is something which is extremely important to guarantee the resilience of a service, which is increasingly important to help support the growth of consumptions. As to the question about a gas distribution, in March, this year, the same question was asked.

And I will give you the same reply. We are not present in the gas distribution business with exception of a few limited realities. As we said in March, we do not rule out anything by itself a priori. We shall assess any opportunity case by case, and especially we shall assess whether these opportunities can provide synergies with water and electricity. We’ll see whether any opportunity come up and whether these opportunities fit within our strategy.

Now within our business plan, the focus of Achea is within in infrastructure and the distribution business. As to the update of our business plan, as I said, we are waiting for the development of nonsecondary events, which is, for instance, the extension of the concession of the electricity grids. Now we do not have any figure about the impact of any concession fee, but this is a significant event with a meaningful impact on our business. So over and above what we said in our conference call in March when we said that we were going to update our business plan in following this year, but we should perhaps suggest that will give you necessary updates. Now and then the aqueduct in Pisquera, we confirm that we are seeing the the go ahead.

Now we need to clarify the dynamics of the Aqueduct Of Pesquera. This is the biggest strategic investment for this country. It’s a project which provides the modernization and the update and safety of the aqueduct in Pesquera. There is an extraordinary commissioner appointed by the government itself. The project envisages annual CapEx of 1,400,000,000, one point five billion.

So $850,000,000 has been financed by public contributions. We said during the presentation of our business plan in March, the Aqueduct Of Pesquera will not be part or will not fit in the business plan horizon of Pesquera because, first of all, there will be the contribution of public funds and then the credit cards will be financed by Thijs. We are in the process of preparing all of the necessary documentation to prepare the tender start of the Aqueducto Esquera project. Thank you. Thank you very much.

The next question with David Candela with Intesa Sanpaolo. Good afternoon to you all, and thank you very much for the presentation and for taking my questions. Now the first question about the leverage. Can you please remind us what for you is a comfortable level of leverage versus the EBITDA? And whether there are any covenants on the debt, which do not allow you to go up to certain levels?

Second question related to the first one. By assuming M and A, so there might be a contribution on your part and on the part of companies contribution to electric consumption concession leverage the amount up to 3.5. Now I wonder whether you are going to think about issuing hybrid debt to take care of the leverage, which is not included in your business plan and perhaps you have an update about this as well. Now in this moment, within our guidance, leverage is between 3.4, three point five. As usual, we are going to assess cases one by one as more than once the issue of extension of the concessions.

As I mentioned, well, it all depends on the concession fees, And it depends on the mechanism which is being thought of. On the basis of this, we can acquire the investment. As to the funding means, we certainly are thinking about this because you need to add in advance when it comes to the events. At the moment, we have a number of lines which are not in which one we can certainly go or issue bonds or green bonds or blue bonds, which as recently, we have updated our framework to include also the idea of blue bond. Let me mention that most of our investments are related to the hybrid world where we have investments around 1,500,000,000.0 a year, and we have the ability to attract investors to bond itself.

Now blue bonds have not been issued in high numbers. Certainly, they haven’t issued in high numbers in United States. And then, of course, we could resort to a hybrid and that do not rule out anything. Altria, as I’ve said, has the possibility to face up to investments, which it has to make for, you know, the concession fees for electricity grids. Let me continue by saying that grids related concession fees is a regulated business.

We constantly have a dialogue, a very constructive dialogue with the agents Now the greater the greater of its regulated business of a chain, it would be quite normal that our capability to, you know, have a positive discussion with the authority. Now you know that regulated business, you know, have a a higher EBITDA than ours. And, of course, we also establish or have established a positive constructive dialogue with the rating agencies. So there needs room for improvement in the ratings if our revenue business goes up. However, we will give you all the necessary information when time comes.

Just reminder, right, if you have any question to ask, you may press and one on your touch tone telephone. Ladies and gentlemen, there appears to be no other question from the conference call. Well, thank you very much for taking part in the conference call. Let me remind you that the Investor Relations team is available to answer any questions or any clarification you might have. This is the Chorus Call operator.

You can now disconnect the phone and the conference is now over. Thank you.

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