Earnings call transcript: Heroku sees 29% profit growth in Q1 2024

Heroku, with a market capitalization of €6.15 billion, reported a robust financial performance for the first quarter of 2024, with a net profit of €447 million, marking a 29% increase from the previous year. Earnings per share rose from 24 to 31, while operating cash flow saw a significant boost to €1,148 million. According to InvestingPro data, the company’s stock has delivered an impressive 14.28% return year-to-date, supported by strong fundamentals and a healthy dividend yield of 3.57%. Despite the lack of specific guidance for 2025, the company anticipates continued growth aligned with its business plan, driven by strategic investments and market expansions.

Key Takeaways

• Net profit increased by 29% year-over-year to €447 million.
• Operating cash flow rose by €210 million to €1,148 million.
• The company launched innovative projects, including a carbon fiber regeneration plant.
• Heroku continues to pursue mergers and acquisitions in the waste management sector.
• The company is exploring potential gas distribution tenders and electricity distribution concessions.

Company Performance

Heroku demonstrated strong performance across all its business lines, reflecting a solid execution of its strategic initiatives. The company’s diversified operations in energy, waste management, and network services contributed to a total shareholder return of 36%. InvestingPro analysis reveals an impressive Financial Health Score of 3.17 (rated as GREAT), with particularly strong momentum and profitability metrics. The company’s P/E ratio of 13.38 suggests reasonable valuation relative to its peers. Heroku’s competitive advantage in the Italian waste management market, coupled with its extensive customer base of 4.6 million, positions it well against industry peers.

Financial Highlights

• Revenue: Not specified
• Net profit: €447 million (29% YoY increase)
• Earnings per share: Increased from 24 to 31
• Operating cash flow: €1,148 million (€210 million increase from 2023)

Outlook & Guidance

Heroku did not provide specific guidance for 2025 but expects growth in line with its business plan. The company plans to focus on mergers and acquisitions, particularly in the waste management sector, and anticipates investments of around €1 billion in 2025. Additionally, Heroku is considering opportunities in gas distribution tenders and potential extensions of electricity distribution concessions.

Executive Commentary

• "We want to create growth that generates value," stated Christian Fabry, Executive Chairman, highlighting the company’s commitment to sustainable growth.
• Massimo Vai, CFO, commented, "Our intention is to continue to hover around this reference," indicating stability in financial targets.
• Horacio Yacono, Executive, emphasized, "We have a very large asset base, and we always look for the right opportunities," underscoring the company’s strategic approach to growth and acquisitions.

Risks and Challenges

• Market Transition: The shift from regulated to free energy markets could introduce competitive pressures.
• Regulatory Changes: Potential changes in environmental regulations could impact operations.
• Economic Conditions: Macroeconomic factors, such as inflation or recession, could affect consumer demand and operational costs.
• Supply Chain: Disruptions in the supply chain could affect project timelines and costs.
• Energy Market Competition: Increasing competition in the energy sector may pressure margins and market share.

Q&A

Analysts inquired about Heroku’s strategy to offset market challenges and the potential impact of gas distribution tenders. The company addressed competitive pressures in the energy market and detailed its strategy for maintaining a robust customer base amidst changing market dynamics.

Full transcript - Heron Resources Ltd (HER) Q4 2024:

Jens Hansen, Investor Relations, Heroku: Good afternoon, everybody. My name is Jens Hansen, Investor Relation for Heroku. Welcome to our presentation for the financial year 2024. We apologize for the delay, but our board meeting only ended ten minutes ago. And I’d like to give the floor to our Executive Chairman, Christian Fabry, who will begin the presentation.

Thank you and good afternoon, everybody. I also want to apologize for the fifteen minute delay, but we had several items on our agenda being that we were slightly delayed. Our intention is to organize this presentation with you following the board meeting just to help you understand, have a better flavor of the figures we published. I’m supported by the usual team, Jens Hansen, our CEO, Horacio Yacono and Massimo Bay, our CFO. Let’s begin with the year result presentation, which we approved this morning during the board meeting.

And these results fully confirm the strategy that we had already explained during our business plan that we’ve been working on for years now. We want to create growth that generates value, a growth which taps into the growth we also posted in 2023. When we met last year to comment those results, we mentioned that it was the biggest EBITDA growth ever. And this year, we have had the biggest growth in profit in the company’s history. And of course, all of this is due to structural activities, which also offset certain opportunities that are no longer, such as the eco bonus that we saw in 2023.

Now this growth leads us to a constant dimension in terms of EBITDA, EBIT and net profit. As far as EBITDA is concerned, we have grown by million compared to the previous year. And this is a constant growth, which also happens on the EBIT level. On the one hand, we’ve had an increase in the investments, something that we’ve been developing over the past few years with the increase in amortization, which was offset by a reduction in accruals, also due to the reduction and the normalization of the energy scenario, which again allowed us to offset things with the growth on EBIT worth $89,000,000 which brings us to the $893,000,000 which are the 2024 results. As far as net profit is concerned, we stand at $447,000,000 compared to the $348,000,000 last year with a €98,000,000 growth, which is almost 29% in terms of growth year on year.

But the reported growth brings a further €48,000,000 in terms of growth. Which aren’t mere accounting figures. These million, like the million last year, are due to ASCO PIAVE’s removal from the SP Energy accounts. And that allowed us to save some money compared to what we were expecting to pay, a total amount equal to 75,000,000. And that’s something that we had already booked in.

Therefore, that allows us to create some cash in a coherent way. Now if we look at the levers that allowed us to grow in terms of EBITDA, this is due to structural growth, as I was mentioning earlier. And we can see some positive contributions from all business lines, energy supply, waste and our networks. All three business areas offer a positive contribution. And this, of course, underscores the quality of our portfolio and our ability to use different levers allowing all of our businesses to grow within the portfolio.

The main growth happened in networks. As you know, we’ve benefited from a recovery in tariffs, both in terms of WACC and Infiniti, which began in early twenty twenty four, following the growth that we have seen both in terms of the cost of debt and in terms of the inflation that was linked to cost. And therefore, we’ve seen a very good opportunity. Moving on to the following page. You can see the way in which this growth is linked to value creation.

We have an overall TSR worth 36% in the reported elements, which becomes 33% if we consider the recurring items. And therefore, overall, our EPS moves up from 24 to 31, whereas the reported one goes up to 34, which allows us to confirm the dividend policy that we had already announced during the business plan presentation and following the forecast regarding 2024 figures. So we have a 36 TSR, which I think is a figure which perfectly describes our desire to create value, which is in line with what we had said during the business plan presentation. Now moving on to the various businesses. As you can see, the presentation is fairly streamlined.

That’s also a way of leaving you enough space for Q and A. A very important topic. We wanted to continue talking about sustainability with a sustainability budget. The two types of figures have not been blended due to CSRD commitments. And therefore, you have a figure here of what we intend to do in terms of creating value.

We want to create shared value, a value which leads to benefits in terms of sustainability. Now the shared value has grown by 14% CAGR ever since we began monitoring shared value in 2016. We now stand at 24% of the group’s total EBITDA. And as you can see, it grows much faster than the EBITDA growth because roughly 90% of the growth that we have developed over the past nine years during which we’ve been measuring these elements is in fact sustainable growth. And that gives us the an idea of the dimension we have reached with the end of that of the financial year.

Now moving on to the various businesses. We want to confirm the things we had said during the business plan presentation. We are reaching year end with 4,600,000 customers, which gave a good contribution to value creation. And as far as EBITDA is concerned, as you can see, with a EUR 23,000,000 growth, we were able to offset the million that expired with the end of the eco bonus and the value added services with a million growth in terms of organic growth. So we have an 18% structural growth, which in this area of business brings us to EUR $672,000,000.

As far as customers are concerned, as I mentioned, we stand at 4,600,000 customers. And we’ve seen an inverter trend. We now have more electricity customers, whereas gas customers have gone down by slightly less than 100,000 customers, whereas we’ve had an increase in 900,000 electricity customers, which includes STG customers. But we’ve also had part of those free market plus our commercial activities that were able to offset the churn. Let me give the floor to Horacio, who will be talking to us about the waste business and the networks.

Thank you, Christian. Good afternoon, everybody. As far as the Waste business is concerned, let me begin by giving you an overview of our business here. And numbers in this business prove the fact that this is indeed a very interesting business. We are more and more focused on transforming waste in a fully circular approach.

This is something very tangible, very pragmatic. We are growing in terms of circular economy, and we want to continue growing. We want to continue creating value, thanks to our very large and modern asset base. As you know, we have over 100 different waste treatment plants. In 2024, we were able to strengthen our leadership very much with a further organic development of our presence in the special waste market.

This is especially important given the context in which we’re seeing a slowdown in industrial production, whereas we continue to grow in a very positive way. This is due to a number of plants that we have began running already in 2024. Others still will begin functioning in 2025 and in the future. In 2024, we have the F3 plant in Ravenna, which focuses on hazardous waste. We also have the TRS plant that we acquired in 2024.

Then, of course, we have the ACR company, which we always mention very fondly. The ACR company is a company we’ve made the acquisition of in 2023. They focus on soil remediation. And we’ve been working on their traditional customers, but we’ve also been reaching out to large corporations. The GSR company focuses on solid and liquid waste for large corporations.

This was a challenging year, but we were able to continue in our organic growth. And also in 2024, we had an M and A transaction, the TRS Ecology Company, which I mentioned earlier, which is a smaller acquisition, although it’s a strategic one because that company operates in an industrial district where most of the Italian market is concentrated. And for us, this is a routine transaction, as you’ve seen in recent years. And we will continue to focus on M and A in a highly fragmented market. Recently, in fact, we signed the acquisition of Abiente and Regia from the Marzotto Group, a company which focuses on liquid waste.

This constant evolution of ours towards an increasingly circular business to reach year end 2024 with the completion and the launching of the new plant to regenerate carbon fiber, which is a one of a kind industrial plant in Europe. And it continues to allow us to innovate and to promote short and circular value chains, which is something that Italy and Europe need very much given the scarcity of raw materials. On Page six, we have a summary of what we were able to achieve in terms of numbers and results. We’ve seen a 4% EBITDA growth. We now stand at $367,000,000 All of our managed activities contributed to this number.

We have the collection of waste, which achieved a million growth, which may appear to be a small figure, although there’s plenty of work behind that number. We’ve had inflation recognized. Plus, we’ve also worked on efficiency in terms of operational costs, which is something that we will always continue to focus on. And we also want to continue expanding in value added services, which is something that we offer in our local territories and which is starting to give us some very visible results. And now that we have gone beyond at the beginning of the concessions, the initial phase in concessions, we’re starting to see long term period results, which are based on long concessions, fifteen year concessions that we were able to obtain following the tender process.

The lion’s share, of course, refers to the free market activities, the treatment and recycling activities with a plus 11,000,000 figure. We’ve had an increase worth 8% in special waste, which was achieved for the most part by expanding our market share With the acquisition of over 250,000 tons of new special waste with a stability in prices, which have proven to be resilient even on these levels. And on the right hand side of the slide, you can see that on urban waste and special waste, despite a slight decline in urban waste, which can be referred to the floods we had in 2023, which we were about to overcome brilliantly. But then we also have better results both from industrial waste and urban special waste, which means that we were able to grow in all segments referring to special waste. So the growth we’re seeing in 2024 is even more precious because it is entirely organic.

You know that we operate in a highly fragmented market, which will continue to offer a number of interesting opportunities to grow externally and together with our financial flexibility will allow us to have a very promising future. Moving on to the Networks business. On Page seven, for a very long time, we hadn’t seen such a good year. Let’s take a look at the figures we were able to obtain. We grew double digit by 11%.

As you can see, our networks strongly stand at EUR $519,000,000 in EBITDA. The networks business is the biggest contributor to the group’s growth. And this overall growth is, as Christian was saying earlier, the outcome of the WACC review, it is due to the development investments we’ve made, which have led to a growth in RAB. And something which is always present in our figures is efficiency through the use of technology innovation, digitization. And therefore, we were able to extract efficiencies to counter an increase in inflation costs and due to the regulators’ decisions.

As you can see from the graph here, all of the networks contributed to our growth, the only exception being district heating. But in this case, there is an in progress, a work in progress by the authority on tariffs here. As we had already mentioned earlier, we have had an increase in water, water being the main business, thanks to a RAB, which is now worth DKK1940 billion. As you can see on the right hand side, we’ve had a growth in water worth DKK26 million, dollars which was also due to the increase in WACC and by the growth in RAP and by the recognition of inflation in revenues, which more than offsets the increase in operational costs and the request for more efficiency by the regulator. As far as the gas networks are concerned, we’ve had a growth worth million, which is driven by the increase in the WACC and by the growth of our RAB, mainly due to the investments we made through the digital meter rollout.

As you know, we invest on our smart meters to be able to measure consumption in real time, and therefore, we’re focusing on an increasingly digital and flexible network. Finally, electricity distribution. We’ve had a growth worth $18,000,000 which is also driven by the increase in WACC that we have had in 2024, leading to our growth in RAB. And besides the small inflation recognition, in this case, we have the new ROSS system, which contributed to the results posted by the electricity networks in 2024. This network is one we continue to invest in.

We invest in our hosting capacity to increase our available power and also to strengthen our main networks to interconnect them and to have bidimensional networks, allowing us to accept generated distribution. In a nutshell, therefore, when it comes to networks, we have invested very much allowing us to develop the RAB, especially in the water network, which, as you can see, is the largest chunk on the screen. But in fact, we have invested in all of our businesses, in all of the group’s businesses. So thank you. And I’d like to give the floor to Massimo Vai now.

Good afternoon, everybody. As usual, let’s look at the evolution of our cash generation. 2024 was a particularly positive year. Let’s look at the various items. We have the operating cash flow, which generated a cash generation worth of $1,148,000,000 Last year, we have generated $940,000,000 which means that the company generated a further $210,000,000 in 2024 compared to 2023.

Now compared to the figure that we had shared with you in September, we have added a further 150,000,000 to 160,000,000, I apologize, over 300,000,000, which brings us to 1,148,000,000 Now the net working capital of Absorbas cash worth $183,000,000 We used to stand at two sixty one in September, which means we had an improvement in the cash absorption and in managing the network of capital. To that, we also have to add the updated provisions, which brings us to maintenance CapEx, which has a value worth $563,000,000 which brings us to a free cash flow worth $257,000,000 Following that, we have the development CapEx worth $248,000,000 All in all, therefore, the group has invested $811,000,000 minus contributions compared to $780,000,000 last year. So even in this case, we have increased our commitment to investments moving to the right. We have to take into account the dividend distribution, which is something that you were already aware of in September. Then we have the expenditures for M and A and then that extraordinary, which is worth $555,000,000 which means that all in all, we had an increase in debt worth only $136,000,000 compared to the figures for the previous year with an improvement worth over $200,000,000 compared to the view we had in September.

So things are very positive indeed. Our expectations are very positive. During the Q3 presentation, You had asked me what was our outlook for the net financial position, and I said that we stood at around $410,000,000 more or less, also taking into account the market conditions and the seasonality of things. As you can see, we improved those expectations slightly, which is, of course, in line with the visibility of our financial projections. Moving on to the graph on the right hand side, you can see that the net debt to EBITDA ratio is even better than the great results of it in 2023, which stood at 2.5 times.

Of course, this result was influenced both by the good performance on debt that I mentioned a minute ago, but it’s also due to the good economic growth performance, which we saw throughout 2024. My colleagues who are familiar with our track record when it comes to the net debt to EBITDA ratio have pointed out how this is the best result we’ve had in our twenty year history. So this is a very positive element indeed. Moving on to the following slide. Let me just comment the cost of debt here.

In 2024, the cost of debt, the medium to long term debt stands at 2.8%. It should be 2.76%. We’ve rounded the figure up, which is reduced compared to the figure we had in 2023 despite the fact that the the interest rates in 2024 was higher compared to the average interest rate in 2023. What impacted this element? Well, certainly, all of the debt rationalization activities that we began in the second half of twenty twenty three, you may remember that on the April 13 ’20 ’20 ’3, we had a sustainability linked bond.

And from then on, we started to reconsider our exposition to bank debt that we had used to deal with the events in summer twenty twenty two and winter twenty twenty two, twenty twenty three. At that point, we repaid the debt. And in September 2024, we recovered the EIB line that we had used the previous year. We also tried to use the remaining cash available whenever there were opportunities to offset the financial burdens without ever compromising, in fact, strengthening our group’s financial resilience vis a vis the companies need to continue having a constant and competitive amount of financial resources for our industrial development but also to support our business plan. And we always wanted to keep under control our ability to act in a swift and flexible way with consolidated banks were there to be any short term cash absorption needs, which didn’t happen in 2024, nowhere near what we saw in 2022.

But things can always happen and therefore, we’re always equipped to deal with those instances. So from this point of view, I think we could be very pleased with the results we’ve obtained. As you know, in January, we launched a new green bond on January 8 with plenty of interest on the market. Our overall yield was slightly below 3.4%. But since we have a temporal expiry of our bonds for some million per year, this cost only has an impact lower than 10% on the overall average cost.

And even when it comes to the year 2025 and the future, with a view to the interest rate trends that we’ll be seeing over the next few months, our intention is to continue to hover around this reference. As far as the makeup of the debt, the mix between variable and fixed interest rates, we are very resilient because as you can see, 97% of our medium to long term debt has a fixed rate, which means that it isn’t influenced by variation in interest rates. Only 3% is variable. And then on the right hand side, we have a summary of what our qualitative and quantitative numbers are. As you can see, our Standard and Poor’s and Moody’s ratings brings us on the same levels of fully regulated businesses.

Whereas, as you know, we have a mix between regulated and liberalized, which again confirms our soundness and the low risk profile for a company, which at the same time can continue to offer some very good level of performances. Back to Christian for some conclusions. Thank you. I’m sure you’ll agree with us that the figures are good. And the numbers, I think, give you a flavor of the effort we’ve made to create value.

This is the first step in our business plan. We’re off to a good start. And as Massimo was saying earlier, we have a financial flexibility, which is certainly among the lowest over our twenty year history. Therefore, again, we’re off to a good start. The cash generation during the year was a positive one, and therefore, we were able to maintain a good debt level and a good level of financial flexibility, which, as you know, is something we want to use for the development of the business plan.

Part of that flexibility has been allocated already, and we can continue to look to using that flexibility for any possible opportunities as we explained during the business plan presentation. So we’re on track as far as our goals are concerned. We have taken the first step And I think that we can have a positive view for what still needs to be done. Last year, you asked us what we expected for 2024. I’m sure you’ll ask us what we expect for 2025.

As you know, we don’t give any kind of guidance on that. But we did present a business plan, as you may remember, with an upwards curve in terms of EPS with constant growth. So that’s the reference, the benchmark we have in mind. And we want to continue to grow and to create value. As we add, we try to keep our presentation short to give you some time for Q and A.

Good afternoon, Mr. Fabri. Our first question is by Javier Suarez, Mediobanca. Good afternoon, everybody. During the presentation, I noticed that the financial solidity and flexibility.

We focused very much on your financial solidity and flexibility. Can you elaborate on that? Because 2.5 times net debt to EBITDA is very low compared to your company’s track record. Now when the Chairman says he wants to use flexibility, can you help us understand what options the company has? What options do you see to use that leverage, which certainly is an asset?

And in this context, although I do know the company doesn’t give any guidance, I wanted to know what you expect from the supply business, especially in the electricity and gas supply businesses in the year 2025, which should be especially tough for the electricity business given the full impact on the clients which move from the mature to tail market. How do you expect to offset that effect in 2025? But as far as the working capital evolution, the $200,000,000 you mentioned, can you help us understand what that figure refers to and how you expect to see the mix capital absorption in 2025? And my final question reverses the context. In your 2025 budget, do you expect Adera to extend the electricity distribution concessions?

What conditions do you see there? What is your view for a company like HERA when it comes to the extension of the electricity distribution concessions? Thank you, Javier. Thank you for the questions. Let’s take them one by one.

Financial solidity and flexibility. Now through the business plan, we’ve already allocated part of that flexibility, both for the organic investments and for M and A. As you know, we included €700,000,000 for M and A. That’s something that we are already partly working on. As for the IMAD transaction, as you know, we signed the deal in January.

We’re looking at a number of other files. But that’s the, call it, ordinary amount we look at. We have already increased our investment plan. And including M and A, we stand at 4,600,000.0. So part of the plan already includes using part of the leverage all the way to 2.8 times, which gives us some further flexibility we can use both on the organic side of things.

And this brings me to your fourth question on the electricity networks. Were there to be the opportunity to spend in that business, it’s a remunerated business and therefore, we could do that. We haven’t included that in the business plan. And it could be done for organic growth and for M and A as they are approved. As you know, M and A is part of our tradition.

It’s part of our strategic vision. We usually look at M and A linked to our business areas, and the goal there is to create synergies that can allow us to extract value from the M and A transactions with multiples that are acceptable compared to the multiples Hera is traded at with no dilution. That’s what we’ve done in the past, and that’s what we intend to continue doing in the future so that we can use the flexibility we have because, as you know, flexibility allows us to take advantage of opportunities on the market. And in fact, if you look back to the deal we signed with Escopiabe to acquire their customers. When we signed that deal, we were able to then extract synergies.

We were able to achieve overall growth. And we were also able to save compared to the initial estimate we had made, the EUR 75,000,000 that we were able to save between EUR 74,000,000 and EUR 73,000,000. That is a reduction in our financial commitment that we can use elsewhere. When it comes to the supply business and specifically the electricity supply business, the more relevant things we’ll be seeing in 2025 will be the reduction of the Stavaguaia market, which we were able to win for the two year period, but we saw some lower numbers compared to 2024. And that is linked to the forecast we already included in the business plan, which is the normalization of the opportunities, which gave us a major boost in the past and which we are normalizing over time.

This year, we offset the expiry of the Super Eco bonus and the last instance markets and we’ll continue this direction next year. As far as the SDG market is concerned, we will be seeing some higher impacts for sure because we have had a reduction in customers, but we’ll have a further six months. So we feel we’ll be able to offset those numbers with the evolution of the market, which is part of our development forecast, in fact. As far as the evolution of the electricity networks are concerned, we’ll have to wait and see what will happen. Over the next few hours, we expect to see the consultation document published by AREDA, which would define the ways in which the extraordinary plans will have to be submitted so that the concessions can be extended for a further twenty years.

So we’ll just have to wait and see what the document will include to see what assessments we will have to make on the topic. I don’t think AREDA will say anything about the CapEx contribution that we will have to consider for those concessions to be extended. Late last year, there were rumors regarding EUR 6,000,000,000 to EUR 7,000,000,000. And of course, if that estimate is done in a linear way, that would mean EUR 50,000,000 to EUR 60,000,000 in an overall effect for us. Of course, the government will have to decide and we’ll see what their decision will be.

Obviously, due to the way in which it was defined in the budget law, this element will then consider a full remuneration as if it were an investment in material assets. And therefore, these are extra investments that we will be making, which will increase the RAB. This year, the electricity RAB grew EUR 50,000,000 due to organic activities. And if this were the case, we won’t be growing by million, we’ll probably grow by something more than that as the amount of the contribution. So this isn’t a criticality since we will continue having that remuneration based approach.

Mastimo, do you have anything to add regarding the net working capital? Obviously, the projection regarding the net working capital is a more complex one given the company’s size. This year, our turnover was worth billion. And therefore, the changes in net working capital can be influenced by a number of different parameters. And given these the amounts we’re mentioning, it can change very much.

Having said that, if we look at 2025, what we’re seeing is we don’t have any specific volatility elements. We closed the year 2024 at a better level than what we were expecting. So that’s an element that we certainly take into account when it comes to our forecast for 2025. In 2025, we also hope to include the acquisition, the integration and the consolidation of IMAAC. So we’ll have to see how that will have an impact on our net working capital.

In the meantime, what we’re continuing to do, and that certainly is an element which contributed to the improvement of our performance in the last quarter in 2024 compared to September, is the activity we began a few years ago, which we’re continuing to optimize, which is the acceleration of the time lag between invoicing and cashing in. And that has benefited us at the end of the month, of course, and that translates into a better availability of a cash and lower amounts of pending credit at the end of the period. In a nutshell, therefore, the outlook is pretty stable, following a year in which we had a marginal absorption of five eighty million, which given our size isn’t anything significant. And it was a year last year in which the CNN the CCN gave $520,000,000 whereas the previous year, you may remember that we had two variables, which we had to consider in 2022, which were the energy price and the gas storage activity, which we did back then, which then released net working capital in 2023. And we don’t expect to add a further million customers next year and therefore an increase in CCN.

And as far as M and A is concerned and our development activities, I’m sure you do see a trend. As we were saying earlier, the IMAAC transaction is on track when it comes to its execution. And as you know, the waste business is the business area with the most opportunities. And as you have seen, every two to three months, a new opportunity appears in that business. And we tend to choose companies that are a good match for our platform.

As Rachael was saying, we have a very large asset base, and we always look for the right opportunities to add to our asset base and to add to our businesses. And we always look to cross sell to increase our customer base and to reach out to new opportunities in the waste business. Thank you very much. The next question is by Emmanuel Locioni, Kepler Cheuvreux. Thank you and good evening, everybody.

I also have a few questions for you. Going back to what our colleague was asking regarding your outlook for 2025, as usual, you don’t give us any guidance, but can you just better outline the moving parts? You mentioned the negative. You were mentioning that for the entire twelve months, you’ll be losing customers for the gradual for the safeguarded market, but that will be offset by other relevance in the supply business. Can you give us maybe the moving parts in the various business divisions?

And also referring to the energy supply business, I seem to remember that in late September or early October twenty twenty five, the last resort customers that you are managing will be expiring. That’s for the gas last resort market. So can you just remind us what assumptions you have regarding what success rate you expect to have. And then moving on to the waste business. In 2024, there was a good increase in volumes, especially when it comes to special waste.

You increased those volumes by 4% and even the EBITDA in that business grew by 4%, which means that the margins were protected very well. Even despite the small acquisition you announced, but focusing on organic growth, what do you expect for 2025 in terms of volumes and therefore also in terms of EBITDA? Do you expect the growth to be in line higher or lower? And then as far as your fiscal credits are concerned, could you please remind us what you’re still left with? If I remember correctly, it’s EUR 200,000,000 per year for a two to three year period.

Thank you. Thank you, Manuel. Well, as far as 2025 is concerned, as I was saying earlier, I think the theme for 2025 is a reduction in the last instance market. We’ll have something slightly less in the Saba Guardia market. As far as the tenders are concerned, as you know, we just look at the opportunities out there.

So we didn’t embed those opportunities in the business plan, And we’ll just have to wait and see what conditions the tenders will offer and how interested we’ll be in that specific business. So we’ll just have to see how the market evolves and what the market conditions will be in that given moment in time. And as that can only be an on top opportunity, we don’t include that in the business plan forecast, as you know. As far as the electricity business is concerned, as I was saying earlier, we’ll be offsetting the increased investments in SDG through market developments. And therefore, we’re fairly confident in that case that we will continue to work to increase our presence on the market as a way of offsetting a part of that margin that we will be losing on the last instance market.

On the other businesses, the moving parts are positive on all businesses. What about the waste business, Horacio? Hello, Manuela. Well, as far as the waste business is concerned, let me begin by saying that Italy’s undercapacity is a competitive advantage to us given the things I said earlier, given our ability to treat any kind of waste, be it solid or liquid, hazardous and nonhazardous. Plus, there is another thing which is something we’re very pleased with, which is the good reputation we have vis a vis our larger customers, our large industrial groups.

They look for an outstanding partner such as HERA. Earlier this year, we launched the circular yard with Fincantieri, allowing us to manage the waste coming from their eight shipyards worth 100,000 tons of waste. So as far as the industry is concerned, as we’ve already said in other conference calls, we’re very much present in the oil and gas business. And in oil and gas waste, of course, which is something very positive for us. It’s anticycle compared to other industrial sectors.

And we also look at the food industry, the healthier industry, both of which are very positive for us. And we can guarantee our presence there, thanks to the asset base we have, thanks to the plants we have. Think of the F3 plant and a number of landfills we own, such as the one in Feronia, which allow us to close the loop. So we have TRRS, which we’ll be seeing for the entire year. Then we have Ambiente Generugia, the contract for which we recently signed with Maraferto Group.

And then as far as organic waste is concerned compared to 2024, to 2024, we will have less downtime in our waste energy plants. Because as you know, in 2024, we had some we had two longer stops, which we don’t expect to have this year. And that is an organic growth that we expect to be able to achieve in 2025. So basically, we expect 2025 to be in line with the growth trends we embedded in our business plan. In a nutshell, the amount of fiscal credits as at December 31 was slightly below $700,000,000 Our target was roughly $600,000,000 We have postponed $100,000,000 towards banks at the beginning of this year, which is something we’ll be completing over the next two months.

So adjusted, the the target value was $600,000,000 You had a slight delay at December 31. We stood at slightly above $700,000,000 As far as the moving parts are concerned, I didn’t go back to the topic of the IMAAC deal. Of course, we expect to close that deal early in the summer so that the consolidation of IMAAC is a moving part you’re aware of, which will give a major contribution to our year results. The next question is by Francisco Salabanca, Good afternoon and thank you for your presentation and for giving us this opportunity. My first question refers to the gas supply business.

I’d like to have a better understanding of what happened in Q4 with a very positive result even compared to last year. Is there any nonrecurring element which had an impact on the figures which were much better compared to Q4 the previous year? Second question, also on the gas supply business. Between Q3 and Q4, there was a reduction in the number of customers. What were the drivers behind that reduction?

And finally, regarding the electricity supply business, what are your most recent figures concerning churn rate are you seeing a large number of customers going back to the Manjotutila market given the fact that deadline was reconsidered? Thank you. Yes, I was taking note of your questions. As far as supply in Q4 is concerned, well, usually, the fourth quarter tends to have a larger growth compared to the other quarters of the year. So we usually expect to see growth in that specific quarter.

And at the end of the year, things went slightly better compared to the previous year due to some opportunities we saw at the end of the year and that will drag on into 2025 as well. And then it was a slightly colder year compared to 2023. So those are the elements we saw. And then the other element, which I think is something we saw in the gas market in 2024 compared to 2023, is a full recovery of shaping costs, which had a higher impact in 2023, which continued all the way to the end of 2023. But now we are seeing the normalization of our contracts, which we’ve explained a number of times already.

As you know, our contracts now include a pass through linked to the shipping costs. And then we’ve also seen a normalization of the energy market. We did see an increase at the end of the year, but something which used to be a source of concern in terms of shipping costs was the volatility which led to EUR 50 or EUR 60 per megawatt hour on a daily basis. And that in turn led to higher shipping costs. That no longer happens, and it was something that we were able to fully sterilize in our contracts.

And then we also had a few customers which left us at the end of the year or during the summer, and we saw that impact in Q4 twenty twenty four. Now as far as the customer base is concerned, as far as the number of customers is concerned, that number declines slightly because some of those SDG customers are outbound. It’s the normal churn rate that we were expecting. At the end of the business plan period, we were expecting to have 4,500,000 customers generally. It was something that we very much expected.

We are offsetting that by conquering new customers through our typical commercial channels, and we are also working to giving value to them through our good services, of course, but also through cross selling activities and through exchange in offers, which is something we usually do. Now what we’ve seen in the first few months as far as these new customers are concerned is that they are very positive. They exceed our expectations compared to when we made the offer to them. So we’re quite confident. This may be due to the Guzmanioli decree or due to the bills decree.

We may be seeing a higher number of customers on the SDG market. That certainly is a value for us because in late March and early April twenty twenty seven, they will be switched to the free market, and therefore, they will automatically begin to generate positive margins. And the number of customers we’re seeing there is fairly limited. So we’re not concerned in terms of extra investments to be made in 2025 and 2026. The churn rate continues to be lower compared to the market average.

Of course, I won’t give you the exact figures because that is a commercial, it’s a trade secret. And the Prosimo de Cristina market, we’ve already answered that question. The next question is by Davide Candela, Pancanteso San Paolo. Good afternoon and thank you for your presentation and thank you for giving us this opportunity. I have two questions also linked to the supply business.

The first is more related to the context. There seems to be an increase in competition. So there may be higher pressure from competitors and lower margins, although we haven’t seen that in Q4. Has there been a delay in this normalization phase? And if so, are you noticing that or do you think this higher competitive pressure will reduce participation by smaller players, giving you market opportunities for M and A deals.

And also linked to that, I have a second question more linked to gas. You said that Q4 was just the coldest period of the year. You gave some good results in terms of volumes. Do you think that will be confirmed in 2025 based on what you’re seeing? And are you in line with your participant forecast in terms of volumes?

Or is that growth something on top of what we’re expecting? In fact, we’ve been seeing increased competition for the past twenty years. When we began our commercial activities, we had 700,000 customers with a churn rate, which at the time seemed huge. That was very limited. And despite the increased competition of the years, we have continued to grow.

Obviously, the more players you have on the market and the more investments and pressure you have on the market, the more competition increases. Obviously, when it comes to the small and medium sized players, what you were saying is true. What I mean by that is that the more the competition, the more structures you need to manage your commercial channels and to manage more complex offers and of course the quality of CRM. Twenty years ago, the levels were very different. All this requires investments, meaning that the smaller players on the market, as you know, there are some 600 players on the energy and gas sector.

Their business model is that they want to continue being a small boutique offering services to a limited number of customers. But for the medium sized companies, it becomes complex to hold on to their market share because they have to equip themselves with systems that can compete with the larger companies. And our growth over the years has allowed us to make major investments in all of our structures and all of our IT platforms. So that is the effect of competition. And then the impact of the weather on Q4, that gives us visibility on a single quarter.

In early March, we thought that the warm weather had already arrived in one of the more recent days. It has been colder. So we’re switching back and forth. Figures regarding heating systems is are intermittent. It’s complex to manage.

But what we’ve done over time is we have been able to reduce the variable margins from customers and therefore we’ve been able to mitigate things. Five to ten years ago, the margins from our gas customers was variable for the most part, whereas nowadays, also as a way of taking into account the consumption cycles, which are changing, we now have a lower impact and lower reaction compared to the consumer or the consumption trends. And when we develop the plans, we take into account specific customer consumption developments, which are in line with the efficiency, heating and electricity electrification of consumption trends. And in fact, we’ve shifted towards electricity consumption. So what we’re seeing is we have fairly mild winters but with a very hot summers.

So the switch towards electricity customers allows us to more than offset the volatility that we’ve seen in gas due to the weather. So all in all, over time, we’ve seen a fairly stable situation and one business offsets the other. But again, we’re moving towards the electrification of consumptions and therefore, we have seen a change in the approach we have towards our electricity customers and the growth in the electricity customer base. We have a follow-up question from Emmanuel L’Ogione, Kepler Cheuvreux. Thank you.

And I have forgotten a question regarding gas distribution. You are surely interested in the tenders, the bids for the assets that Itau Gas 2I and Itau Gas will have to sell. We know that you are interested, of course, but are you interested in the assets in the core regions you already operate in or in the neighboring regions? But would you also be interested in buying a larger chunk of assets in other regions, in other parts of the country since you have plenty of financial flexibility? Would you be interested in the entire set of assets?

Would you be interested in other regions as well? We’ll try and because we usually make our announcements when we complete the deals, whereas what you’re referring to is a mere teaser. We’ll see. We’ll have to wait and see what will actually be offered, and we will talk about this in the future. But going back to your question on the moving parts, I think that we’ve seen an increase in the RAP this year.

So this increase in investments, the increase in the RAP worth $250,000,000 which we will continue to strive towards in terms of growth even in 2025. If I remember correctly, we were expecting to have a EUR 1,000,000,000 in terms of investments for 2025. So we’ll be seeing an investment peak which will further increase the RAB. So that’s an effect we’ll be seeing both in terms of EBITDA and in terms of the bottom line. So I didn’t answer your question, but I integrated my answer to your previous question.

I think that’s fair. Mr. Fabi, there are no further questions. All right then. Thank you very much for joining us today.

We were expecting to have a one hour presentation. Thank you very much. All the very best. And we will continue to work to allow the company to continue growing in 02/25. Thank you very much indeed.

Goodbye.

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