Eni Drops as Neutral Results and Weak Refining Cloud Outlook

(Bloomberg) -- Eni SpA shares dropped after fourth-quarter profits in line with estimates offered little clues on how the Italian supermajor will offset broader weakness in energy markets.

A better-than-expected result in the company’s natural gas business helped drive adjusted net income in the period to €1.64 billion ($1.8 billion), in line with the average analyst estimate of €1.63 billion. That’s still 34% lower than a year earlier, with Eni’s refining and chemicals unit posting an unexpected adjusted operating loss.

“Our financial results were excellent, in the face of an uncertain and volatile scenario,” Chief Executive Officer Claudio Descalzi said in a statement on Friday. The firm echoed the performance of peers like Shell Plc and TotalEnergies SE, where the ability to optimize the global trade in liquefied natural gas partly compensated for broadly lower energy prices and lackluster demand for chemicals.  

Eni’s shares fell as much as 2% in Milan trading. Biraj Borkhataria, associate director of European research at RBC Capital Markets, said the results were “neutral” given low visibility on the company’s future performance, adding that some investors may “consider the underlying results disappointing” due to potential one-off effects.

Dividend plans and the company’s outlook for 2024 will be disclosed in a capital markets day planned on March 14, according to the statement. 

Eni’s refining and chemicals unit posted an adjusted operating loss of €87 million, compared with the average analyst estimate for a profit of €182.8 million. “Negative trends” in the sector reduced margins by about 40% from a year earlier, the company said. 

Results for renewables unit Plenitude were also below estimates at €111 million, as lower margins from power sales offset an expansion in renewable generation capacity.

Meanwhile, Eni’s natural gas business posted a quarterly profit of €677 million, well ahead of the average analyst estimate of €477.2 million, “driven by an optimized natural gas and LNG portfolio and contract renegotiation benefits,” according to the statement. 

“Cash flow generation at €16.5 billion before working capital movements gave us a significant headroom over the substantial cash returns to shareholders of €4.8 billion,” Descalzi said.

The state-controlled energy company is nearing the completion of a €2.2 billion share-buyback plan. The move could pave the way for the Italian Finance Ministry to sell as much as a 4% stake in the company to help reduce the country’s debt pile and fund electoral promises. Italy aims to raise €2 billion from the sale, people familiar with the deal have said.

(Updates with shares and analyst comment from fourth paragraph.)

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