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REPSOL: 4Q’19 RESULTS (ANÁLISIS BANCO SABADELL)

4Q'19 vs. 4Q'18 Results
EBIT: € 749.0 M (-42% vs. -31% expected);
Net Profit: € 405.0 M (-35.9% vs. -33.7% expected and -33.4% expected by the market consensus);
FY2019 vs. FY2018 Results
EBIT: € 3.647 Bn (-17% vs. -14%expected and n/a expected by the market consensus);
Net Profit: € 2.017 Bn (-15.4% vs. -14.8% expected and -14.8% expected by the market consensus);

The adjusted 4Q’19 Results came in very much in line with expectations in Net Profit although slightly below (-35.9% vs. -33.7% BS(e) and -33.4% consensus). In accounting terms, the expected burden of provisions: € 5.823 Bn (€ 4.849 Bn on impairment of Upstream asset in the US and Canada and € 837 M on Addax arbitration process) resulted in € -3.816 Bn of Net Profit. However, REP announced a € 1.00/sh. dividend’19 (+5%; 8% yield), +5% above our expectations and those of the consensus. FFO grew +8% although the share buyback programme means a slight increase in NFD (+4% up to € 8.083 Bn, including leases).
In operating terms (where there is no consensus), our estimate was below in Upstream (41% of EBIT) due to higher exploration costs, but it was in line in Net Profit thanks to lower taxes. Downstream (59% EBIT) the results were in line.
There will be a conference call at 12:30 (CET) in which we expect guidance to be given on 2020, especially in the Downstream division. Although we do not expect much of an impact from these results, we do believe the reaction should be positive, although limited, thanks to the confirmation of the dividend in a year with highly negative Net Profit figures (€ -3.82 Bn). BUY. Target Price: € 18.40/sh (upside 48.99%)