Rubis (RUI) Earnings Call Transcript & Summary

Good evening, everybody. So I'm here with Bruno Krief, Managing Director, in charge of M&A and Strategy that you know very well; and Clemence Mignot-Dupeyrot, our Head of Investor Relations. Thank you for joining us today for Rubis Q1 2024 Trading Update. As you can see on Slide 2 of the presentation, this quarter was one of solid operating performance. The Energy Distribution business saw a strong volume growth. Volume grew by 4%, driven by the strong growth in the Caribbean, more than offsetting the lower margin in the Kenyan retail network, but we'll come back to this in further detail later in the presentation. Margins were stable at plus 2%, when we stated from the exceptional items in Q1 last year. In the renewable electricity production, our plan is well on track with an increase of the secured portfolio of 8% versus December 2023, which is very encouraging for the rest of the year. So on this base, we can reiterate our guidance for 2024. And last but not least, this quarter also saw the finalization of our discussion with I Squared Capital for the disposal of Rubis terminal stake. The SPA was signed early in March and the closing is still expected midyear, but it's subject to the approval of the foreign investment committees and other customary approvals. And I remind you that this operation will generate circa EUR 75 million of capital gain that will be returned to the shareholders through dividend payment after closing. So let's move on Slide 3 and focus on energy distribution. As a reminder, so Q1 2023 was boosted by few exceptionals, representing around EUR 30 million, which were the excess margin in Nigeria and the reference the Madagascar government related to the nonimmediate application of the pricing formula in H2 2022. Volume increased by 4% and gross margin by 2%. So this is explained by our LPG distribution business, so plus 2% in volume and plus 1% in gross margin. Saw a strong demand, especially in bulk product in Morocco and South Africa. Auto, again, also performed well with strong growth in France and Spain following the same momentum as previous years, which should continue going forward. As regards to fuel, so we observed a plus 7% in volume and minus 2% in gross margin. And those elements were comprised of 3 components: First one, the retail business was particularly dynamic in the Caribbean region with the ongoing strong performance of Jamaica. Kenya was also resilient despite the economic downturn, high fuel price and share competition. As mentioned earlier, the gross margin decreased, impacted by unexpected Kenyan shilling appreciation, which generated a parachute effect which means that the inventory sold having been acquired at a higher rate after commission in local currency than in the time of the sale. So we believe this appreciation of the Kenyan shilling should reverse in the second part of the year. After -- we have the commercial and industrial business, which sold plus 7% volume growth. The strong performance of the Caribbean region where Guyana activity maintained its dynamic pace explains most of this growth and the gross margin increased accordingly year-on-year. And third, we have a strong volume growth momentum observed in the Aviation segment in the beginning of 2023, that continued in Q1 2024, landing at plus 39% year-on-year. This increase was driven by Kenya, where a total volume for the quarter almost doubled and the Caribbean regions, where activity was particularly strong. The significant increase in volumes uplifted the gross margin accordingly. Regarding the bitumen, bitumen volumes was down 15% year-on-year. This decrease is mostly explained by Nigeria, where some contractors decided to put the project on hold, waiting for the local currency to stabilize. Also, in the meantime, the government awarded a few permits to build [ seeming ] growth, which didn't help. And Senegal and Cameroon showed good dynamics with volume and margin increasing. Adjusted gross margin increased by EUR 5 million year-on-year. In Support and services, revenue was 13% to EUR 260 million amid a strong comparison base. Q1 2023, so 2 good deliveries to SARA, while in Q1 '24, SARA was in a temporary [ net-net ] and imported only one delivery of refined products. Before, crude deliveries typically happening every year. We've spread over the last 3 quarters of 2024 and the catch-up should be more likely at the back end of the year, apart from this decrease, shipping and supply growth. So let's turn now to Slide 4 to talk about Rubis Photosol. The secured portfolio reached 936 megawatts, up 8% versus the end of '23 and up nearly 75% versus a year ago. Revenue reached EUR 8 million, slightly down versus Q1 '23 due to the positive effect from new farms commissioned, of course, from 394 megawatts in Q1 2023 to 450 megawatts at the end of the quarter, that were partially offset by -- so 2 elements. The first one is the base effect, because in 2023, we had the opportunity to sell, at market price, some electricity to offset coal price adjustment; and this quarter 2024, actually, we had a less stunning winter than last year. In this quarter, we saw the signing of 2 major PPAs, also contract with Data4 and another large corporate. They secured revenues for 10 and 20 years, respectively, representing around 50 megawatts, each of them. If we switch to Slide 5, this slide, you start to know or very well, actually, shows the pipeline or at such time, the secured portfolio ensuring future revenue generation. And this project pipeline amounted to 4.7 gigawatts at the end of March. So let's go to Slide 6. As a conclusion, Q1 was consistent with the outlook provided during full year results and illustrated the relevance of our multicountry, multiproduct strategy. The Caribbean did not slow down as anticipated, despite the high comparable broad base. The situation in IT is still under close monitoring with the transition, President's newly appointed. This higher-than-expected performance was partially offset by Kenya, which suffered from the unexpected Kenyan shilling chilling revaluation. But all in all, this quarter's performance makes us confident enough to reiterate our 2024 guidance, meaning an EBITDA in the range of EUR 725 million to EUR 775 million, a net income group share that should increase year-on-year, and of course, the dividend growth target that is confirmed as well. Thank you for your attention. And so we are ready to take, with Bruno and Clemence, your questions.

[Operator Instructions] There are no questions on the phone at this time.

I have a question from Jean-Luc Romain from [ CICIC ] online. "Is the lower sales number for Photosol in Q1 entirely due to lower pre-contractual sales versus Q1 '23? Can you guide quantitatively on what to expect for the rest of the year?"

So what we can say for Photosol is that -- so we have an effect -- so related to the new -- typically the new asset in operation generated EUR 0.6 million of additional revenues. So it can give you an idea of the trend going forward from new operations.

[ Security ], Q1 and Q4 are the lowest ones in the year and Q2 and Q3 are the highest ones. Then, in -- for the rest of the year, it's a bit complicated. As we mentioned earlier, Q1 '23, so high sales through the market as the market price was high and the [ CRE ] offered the opportunity to sell at market price in order to offset the increase in OpEx and CapEx and interest rates that had not been reflected in the group pricings in that period. This was not the case in Q1 '24. And the rest of the year should continue in line with the CRE contracts that are working right now. We have another question from Mohamed Mansour, but I think it's covering more or less the same topic about electricity production, how it was stable between Q1 '24 and '23 and he's asking why, to effect, all the secured capacity has increased by 5% in Q1. So the answer is the same. The electricity production was stable because the level of fund in Q1 '24 was lower than Q1 '23, and fewer weather issues happened in Q1 '24. I have no other question online.

One question on the phone coming from the line of Emmanuel Matot from ODDO BHF.

Two questions for me. First, do we have to expect some ForEx losses in H1? Because I remember, we had a significant amount of ForEx losses last year. So what was the trend for that in H1? What do you expect at least for H1? And second question, regarding your new shareholders, do you have some contacts with them? Do you know what they want to do with their shares for this?

Thank you, Emmanuel, for your question. Maybe what's on the -- what we can tell on the FX, the currency which varies the most in our current portfolio are the Naira in Nigeria, which saw 2 significant devaluations in 2023 and once early 2024. The situation has stabilized since then. And what happened in 2023 was very sudden and we did not have, really, a time to prepare, which was not the case in 2024. So we now have sufficient USD reserve to handle this devaluation related to the Naira. Regarding the Kenyan shilling, so Q1 2024, so the impact of steep local currency appreciation with inventories having been acquired at a higher rate than at the time of the sale. And our strategy remains unchanged. We intend to minimize our exposure by keeping the currency in our books for as little time as possible. So that's really the main element in terms of -- after a deep [ OFI ] event, we don't disclose the full P&L in Q1. But what we can say that is the revaluation continues. We may see a negative impact related to the Kenyan shilling on our receivables. However, definitely, it's too early to quantify. We are working on the natural age in this unusual situation and the losses should remain under control. And in any case, it will be -- at this stage, it is definitely below EUR 10 million. And anyway, we expect, at the time, we say, the reversal of the situation that should compensate, this is how we see the things. Regarding your second question, so it was exactly on new shareholders. We are -- we say that we enjoy investor appetite for the offerings. This is appreciated and it did demonstrate that there is a significant amount of value in Rubis, so that's a good format. And after, we will be happy to have dialogue with those new shareholders and listen to what they have to say to us.

We have another question from Mohamed Mansour on the line, saying if Photosol is impacted by the connection to the grid issues mentioned by RTE. The answer is, yes, of course, the same way as every other player on the French market. However, the day for the connection to the really big growth on the day you obtain the permits. So we have a lot of visibility on the day when the connection will be able to take place and to handle this very well with a lot of agility in order to optimize these timings and to delay the construction depending on this dates. Another question from Jean-Luc Romain. "In Nigeria, do you already see signs of a recovery restarting in construction?"