Income statement

Net profit

Net profit achieved in the first half of 2014 amounted to €561 million, an increase of €99 million or 21.4% compared with the first half of 2013. This increase was due essentially to: (i) lower net financial expense (+€58 million), due to the reduced average cost of debt, which benefited from the initiatives to optimise the Group’s financial structure implemented by Snam, partly offset by higher average debt in the period; (ii) higher EBIT (+€24 million); and (iii) higher income from equity investments (+€14 million) relating to the shares of net profit for the period of the investee companies valued using the equity method.

Analysis of income statement items

Revenue from regulated activities (€1,748 million, net of consolidation adjustments) relates to transportation (€1,032 million), distribution (€489 million), storage (€217 million) and regasification (€10 million). Revenue from regulated activities, net of components that are offset in costs, amounted to €1,681 million, up by €5 million on the first half of 2013.

Revenue from non-regulated activities (€34 million, net of consolidation adjustments) mainly comprises: (i) payments including storage for the 2013-2014 thermal year, arising from contractual agreements between Eni and Stogit for activities relating to Legislative Decree 130/2010 (€13 million); (ii) technical services mainly relating to the distribution segment (€10 million); and (iii) income from the hire and maintenance of fibre optic telecommunications cables (€6 million).

Costs of regulated activities

Controllable fixed costs (€225 million), comprising the sum of personnel expenses and recurring external costs, were down slightly (-1.3%) compared with the first half of 2013 (€228 million).

Variable costs (€43 million) mainly reflect withdrawals from storage for gas sales carried out for balancing purposes. The reduction of €20 million is mainly due to lower sales carried out in the first half of 2014 compared with the same period a year previously.

Other costs of €73 million mainly relate to interconnection costs (€28 million) offset in revenue and concession charges relating to natural gas distribution (€26 million).

Costs of non-regulated activities

Costs of non-regulated activities (€13 million) were down by €6 million compared with the first half of 2013, mainly reflecting the trend in provisions for risks and charges.

Regulated and non-regulated operating costs for the first half of 2014, excluding components offset in revenue, came to €287 million, down €13 million, or 4.3%, on the first half of 2013. The decrease mainly reflects the management of energy efficiency certificates.

The following table shows the workforce in service at 30 June 2014 (6,035 people) by business segment and professional status.

Amortisation, depreciation and impairment losses (€384 million) increased by €8 million compared with the first half of 2013, due mainly to the entry into service of new infrastructure.

EBIT¹⁵ stood at €1,044 million in the first half of 2014, up €24 million, or 2.4%, compared with the first half of 2013.

Higher revenue (+€19 million), combined with lower operating costs (+€13 million), due mainly to the management of energy efficiency certificates, were partly absorbed by the increase in amortisation and depreciation for the period (-€8 million), mainly reflecting the entry into service of new infrastructure. With regard to business segments, the positive performances of the natural gas storage segment (+€25 million; +14.5%) and the distribution segment (+€5 million; +2.0%), were partly offset by the slight fall recorded by the transportation segment (-€2 million; -0.3%) and the regasification segment (-€2 million).

An analysis of EBIT by business segment is provided in the “Business segment operating performance” section of this report.

Net financial expense (€204 million) decreased by €58 million compared with the first half of 2013, due mainly to a lower average cost of debt, which benefited from the initiatives to optimise the Group’s financial structure implemented by Snam, partly offset by an increase in average debt in the period.

Financial expense of €17 million was capitalised in the first half of 2014 (unchanged from the first half of 2013).

Income from equity investments (€49 million) refers to the share of net profit for the period of investee companies valued using the equity method. Specifically, this refers to associates Azienda Energia e Servizi Torino S.p.A. (€20 million; €19 million in the first half of 2013), Toscana Energia S.p.A. (€13 million; €11 million in the first half of 2013), TIGF Holding (€10 million), Gasbridge 1 B.V. and Gasbridge 2 B.V. (€5 million in total; €4 million in the first half of 2013). The increase of €14 million compared with the first half of 2013 mainly reflects income from the equity method valuation of TIGF Holding, which was created in July 2013.

Income tax (€328 million) decreased by €3 million. This decrease, despite the increase in pre-tax profit, is mainly due to: (i) the decrease from 10.5% to 6.5%, as of 1 January 2014, of the additional IRES rate applied to the natural gas transportation and distribution segments, i.e. the “Robin Hood tax”¹⁶; (ii) the 0.40% reduction in the IRAP rate applied to all business segments; and (iii) the effects arising from the deductibility for IRES purposes of 4% of undistributed 2013 profits (ACE – Aiuto alla Crescita Economica (Help for Economic Growth)), introduced by Decree-Law 201 of 6 December 2011, converted by Law 214 of 22 December 2011 as amended.

The tax rate for the first half of 2014 was 36.9% (41.7% in the first half of 2013).