Income statement

NET PROFIT

Net profit amounted to €1,198 million, up by €281 million, or 30.6%, compared with the previous year. This increase was due mainly to lower income taxes (+€181 million), despite the increase in pre-tax profit, and to higher net income from equity investments (+€86 million), which related mainly to the revaluation of the equity investment previously held in A.E.S. (49%) to its fair value as at the date of acquisition of control (+€51 million) and to the Company’s share of the net results for the period of companies accounted for using the equity method (+€34 million). Specifically, the reduction in taxes is due to the impact (+€120 million) of the adjustment made to deferred taxes after the additional corporation tax known as the “Robin Hood Tax”⁴⁰ was declared to be unconstitutional, with effect from 12 February 2015, as well as to the reduction in current taxes (+€62 million) as a result of the fall in the rate of the aforementioned tax from 10.5% to 6.5% as of 2014.

The increase in net profit was also attributable to the reduction in net financial expense (+€75 million), due mainly to the decrease in the average cost of borrowing, thanks partly to the measures implemented by the group to improve its financial structure. These effects were only partially offset by the decrease in EBIT (−€61 million).

Reconciliation of reported net profit with adjusted net profit

The management of Snam evaluates group performance based on adjusted profit, obtained by excluding special items from reported profit⁴¹. Neither IFRS nor US GAAP makes provision for adjusted profit. Management believes that this measurement of performance allows the development of the business to be analysed, ensuring a better comparison of results.

The 2014 income components classed as special items related exclusively to the effects of adjusting differed taxes (€120 million) for natural gas transportation and distribution companies after the application of the so-called Robin Hood Tax was declared unconstitutional with effect from 12 February 2015.

This effect, classified among the special items, was therefore excluded from the adjusted net profit calculation.

The table below shows the reconciliation of reported net profit with adjusted net profit.

Adjusted net profit in 2014, which excludes special items, amounted to €1,078 million, an increase of €144 million, or 15.4%, compared with 2013. The increase is due to: (i) lower income taxes (+€70 million) due mainly to the reduction, as of 2014, from 10.5% to 6.5% in the additional corporation tax applied to the natural gas transportation and distribution segments; (ii) higher net income from equity investments (+€86 million); and (iii) the reduction in net financial expense (+€75 million). These effects were only partially offset by the decrease in adjusted EBIT (−€87 million).

The adjusted tax rate (which includes the application of the additional corporation tax at 6.5%), calculated as the ratio between taxes and pre-tax profit net of special items, was 36.85%, down from 42.80% in 2013.