Enel's first half boosted by Spain, offsetting Italian margin declines

Enel (BIT:ENEI) reported a 5.4% increase in first-half 2025 revenues to €40.8 billion and a 0.9% rise in ordinary EBITDA to €11.5 billion, driven by higher commodity sales and robust performance in Spanish and Argentinian operations. Group net ordinary income grew 4.4% to €3.8 billion, benefiting from operational improvements and reduced financial expenses, despite negative currency impacts in Latin America. While total EBITDA declined 11.6% due to the absence of prior-year extraordinary asset disposal gains, CEO Flavio Cattaneo expressed confidence in reaching the highest range of full-year net ordinary income guidance and announced a new share buyback program to enhance shareholder returns.

Analysis

Enel reported a solid first half for 2025, with core operational metrics demonstrating underlying strength despite misleading headline figures. Group net ordinary income, a key measure of ongoing profitability, rose 4.4% to €3.8 billion, while ordinary EBITDA increased 0.9% to €11.5 billion on the back of a 5.4% revenue increase to €40.8 billion. This growth was primarily driven by higher commodity sales and robust performance from Spanish operations and Argentina's grid business, which successfully offset margin compression in Italy and a €270 million negative foreign exchange impact from Latin America. The reported 11.6% decline in group EBITDA and 11.0% fall in net income are directly attributable to the absence of extraordinary gains from asset disposals that were booked in the comparable period of 2024, and therefore do not reflect a deterioration in core business performance. Further positive signals include a slight reduction in net financial debt to €55.4 billion and management's optimistic guidance, with CEO Flavio Cattaneo expecting net ordinary income to reach the highest range of the full-year forecast. The announcement of a new share buyback program on top of the existing dividend policy underscores this confidence and a commitment to enhancing shareholder returns.

Key Decisions for Investors

• Investors should focus on the positive underlying operational performance, specifically the 4.4% growth in net ordinary income, rather than the headline decline in reported net income which was distorted by prior-year one-off asset sales.
• The combination of management's guidance toward the high end of the net ordinary income forecast and the initiation of a new share buyback program provides a strong signal of confidence and commitment to shareholder returns.
• Key factors to monitor include the impact of foreign exchange volatility, which presented a €270 million headwind in Latin America, and the ongoing margin pressures within the Italian market from lower retail pricing and weaker hydro output.