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01/11 03:08
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Access earnings results, analyst expectations, report, slides, earnings call, and transcript.
Despite a strong EBITDA growth and improved tariff adjustments, there are concerns about economic instability, currency risks, and unclear management responses to debt-related queries. The Q&A section revealed management's hesitance to provide clarity on regulatory matters, which may lead to investor caution. Additionally, the slight revenue growth and energy sales volume decline could temper optimism. Thus, the overall sentiment remains neutral.
EBITDA EBITDA rose for the 9 months ending September 2025 by 122% to $312 million, equivalent to ARS 440 billion, up from $139 million in 2024. Excluding the CAMMESA impact, EBITDA was up 23% to $171 million for the 9-month period. The improvement was due to higher revenues as a result of the 5-year tariff review and the important adjustment received in February 2024, plus monthly tariff adjustments between August and September 2024 totaling 43%.
Revenue Revenues rose 1% in real terms in the third quarter of 2025 to ARS 741 billion versus ARS 733 billion for the prior year. This was mainly due to the tariff normalization.
Energy Sales Volume Energy sales volume for the third quarter of 2025 were down by 0.8% year-to-year to 5,958 gigawatts, led by the effect of lower temperature on demand from residential customers.
Distribution Margin For the first 9 months of 2025, the distribution margin rose 8% to ARS 865 billion, mainly due to the increase in the tariff, partially offset by higher energy costs due to the reduction in subsidies. In the third quarter, the distribution margin was ARS 399 billion, 12% higher than the ARS 278 billion in the third quarter of 2024.
Net Financial Expenses Net financial expenses were ARS 99 billion in the third quarter of 2025 compared to a profit in the third quarter of 2024. This was mainly due to higher interest rates, issuance expenses, and foreign exchange differences.
Net Results Net income posted a net profit of ARS 40.6 billion compared to a profit of ARS 152 billion in the third quarter of 2024. The difference is mainly due to a much lower accounting gain related to inflation adjustments due to the sharp year-to-year drop in inflation.
CapEx Through September 30, 2025, ARS 283 billion was invested, in line with the 2025 CapEx plan. Investments reflect a commitment to improve service quality, with significant improvements in operating indicators.
Digital Customer Interaction Channels: Expansion of digital customer interaction channels leveraging AI tools, including a new digital app, chatbot, contact center, digital invoices, and social media.
Smart Network Transformation: Installation of remote control points, telesupervision points, and smart meters to enable quick resolution of network issues remotely.
Customer Base Growth: Customer base increased by 2% year-over-year to 3,380,000 clients, driven by residential and medium-sized commercial clients.
Market Discipline Measures: Installation of 7,571 energy meters in Q3 2025 to convert informal connections into formal ones.
Operational Efficiencies: Cost management efforts include workforce optimization, reduced contractor costs, and improved inventory efficiencies. Personnel costs declined due to a retirement plan and salaries below inflation.
Service Quality Improvements: Significant reduction in outage duration and frequency, with SAIDI and SAIFI indicators showing a 74% and 68% improvement since 2017.
Regulatory Framework Adjustments: Completion of a 5-year tariff review with monthly inflation adjustments, leading to a 26% tariff increase year-to-date.
Debt Regularization: All outstanding balances with CAMMESA included in payment plans, improving financial stability.
Regulatory and Tariff Risks: The company has filed a regulatory asset claim with the government for past differences in tariff adjustments since 2019, which could lead to financial uncertainty if not resolved favorably. Additionally, the tariff normalization process and adjustments are heavily dependent on regulatory decisions, which could impact revenue stability.
Debt and Financial Obligations: Edenor has significant financial obligations, including payment plans with CAMMESA and loans with interest rates. Any failure to meet these obligations or changes in financial conditions could adversely affect the company's financial health.
Economic and Currency Risks: The company operates in Argentina, where economic instability and currency devaluation are ongoing risks. A 34% peso devaluation was noted, which could impact costs and financial results.
Energy Losses: Energy losses remain a challenge, with 15.37% total losses reported. Although efforts are being made to reduce these losses, they still represent a significant operational inefficiency.
Market and Competitive Risks: The transition to a market-based electricity pricing system could increase competition and pressure on margins. Additionally, the company faces risks from lower energy sales volumes, which were down 0.8% year-to-year.
Operational and Technological Risks: The company is undergoing significant technological upgrades, including the implementation of SAP S/4HANA and smart meters. These initiatives carry risks related to execution, cost overruns, and potential disruptions.
Supply Chain and Material Costs: Material costs are influenced by import restrictions and inflation, which could disrupt operations or increase costs.
Future Tariff Adjustments: The 5-year tariff review process has been completed, granting a base increase of 14.35% in 30 installments, with monthly inflation adjustments weighted by 67% wholesale price and 33% consumer price. Tariffs have increased 26% year-to-date as of September 2025, against a 22% rise in the consumer price index.
Regulatory Asset Claim: On October 21, 2025, a regulatory asset claim was filed with the government for past differences in tariff adjustments since 2019. The amount claimed is 4x to 5x the current balance with CAMMESA in payment plans.
Debt Regularization and Financial Outlook: The company has regularized its debt with CAMMESA, with all outstanding balances included in three payment plans over 72 and 66 installments, with two plans having 50% of the market interest rate. This has improved the long-term financial outlook and debt ratings, with credit rating agencies upgrading national and global ratings by an average of 4.5 notches since September 2024.
Capital Expenditures (CapEx): Projected spending of close to $200 million in 2025, focusing on modernization, sustainable development, and efficiency gains. Key projects include new substations and network expansions planned for 2026.
Market Reforms: The Secretary of Energy has approved rules for the normalization of the wholesale electric market, transitioning from heavy regulatory involvement to a system based on marginal and market prices. This aims to increase competition and transparency in the electricity market over time.
Operational Improvements: Continued focus on adopting new technologies, including smart meters and remote control points, to enhance service quality and operational efficiency. Plans to close all commercial offices to reduce costs and footprint.
The selected topic was not discussed during the call.
Despite a strong EBITDA growth and improved tariff adjustments, there are concerns about economic instability, currency risks, and unclear management responses to debt-related queries. The Q&A section revealed management's hesitance to provide clarity on regulatory matters, which may lead to investor caution. Additionally, the slight revenue growth and energy sales volume decline could temper optimism. Thus, the overall sentiment remains neutral.
The earnings call summary shows strong financial metrics with a significant EBITDA increase and revenue growth, which is positive. However, there are concerns about regulatory uncertainties, high energy losses, and economic conditions in Argentina, which are negative. The absence of Q&A insights and no mention of shareholder returns further neutralizes the sentiment. The company's financial improvements are offset by potential risks, leading to a neutral prediction for stock price movement.
Despite strong financial performance with significant EBITDA and revenue growth, the lack of clarity in management's responses during the Q&A, particularly regarding future EBITDA, free cash flow, and dividend policy, creates uncertainty. The absence of a shareholder return plan and potential financial strain from debt further contribute to a neutral outlook. However, the tariff adjustments and improved credit ratings are positive factors, balancing the overall sentiment. The market reaction is likely to remain within a neutral range, as investors await more definitive guidance and strategic clarity.
Edenor shows strong financial performance with a 97% revenue increase and improved EBITDA, driven by tariff adjustments. The positive outlook is supported by a stable credit rating and strategic investments in energy transition. However, regulatory risks and economic conditions in Argentina pose challenges. Lack of shareholder return plans and unclear CapEx allocation limit upside potential. Overall, the positive financial metrics and strategic initiatives are likely to result in a stock price increase of 2% to 8% over the next two weeks.
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