Repsol obtained a net profit of 2.341 billion euros in 2018, 10% over the 2.121 billion for 2017 and a record for the company in the last eight years. This fact is significant, as the average price of Brent crude last year was 71 dollars per barrel, compared to 111 dollars in 2011.
Adjusted net income, which specifically measures how the company's business units are performing, also increased 10%, reaching 2.352 million euros. These results reflect Repsol's ability to adapt and innovate, and the fact that it possesses the flexibility required to incorporate and develop new capacities. All of this has enabled the company to increase value generation and, over time, perform a more active role as a multi-energy supplier.
Repsol's integrated business model enabled it to take further advantage of the increase in crude prices, which were 32% greater than in 2017, in the case of Brent crude, despite still being far from their historical maximums.
In this context, the Upstream area doubled its profit to 1.325 billion euros, keeping up the positive trend of previous years. An increase in production and a rise in oil prices were crucial in enabling this positive performance. The effects of the efficiency measures and digitalization programs were also significant and they continue to provide evidence of the company’s efficiency.
The Downstream area obtained a profit of 1.583 billion euros, with better performance in commercial businesses,Mobility, and LPG, and positive performance in terms of Trading & Gas. The Chemicals area was affected by a less favorable international environment and maintenance shutdowns in some industrial facilities, which also had an impact on Refining, in addition to the dollar's weakness against the euro. On the other hand, the company increased its EBITDA up to 7.513 billion euros, a 12% increase compared to 6.723 in 2017.
The businesses' good performance, combined with the sale of our stake in the Naturgy Energy Group, influenced the reduction in net debt down to 3.439 billion euros, compared to 6.267 billion in 2017, a 45% drop.
Given our goal to develop new businesses connected to the energy transition, Repsol reached an agreement to acquire nonregulated low-emission electricity generation businesses of Viesgo and its gas and electricity retailer. With this acquisition, Repsol strengthened its position as a multienergy operator, with a total installed capacity of 2,952 MW.
In the third quarter, the company acquired the Valdesolar photovoltaic project, which will feature facilities with a generating capacity of 264 MW in Badajoz; the project is currently in the administrative processing phase. With these inclusions, Repsol will reach more than 70% of its strategic low-emission generation capacity objective, set at 4,500 MW by 2025.
Furthermore, in October, we obtained financing to build one of the largest floating wind farms in the world, to be installed off the coast of Portugal, and which will have an installed capacity of 25 MW.
Repsol expects to increase its shareholder return by 5.6%, following the approval of the measure in the Annual General Meeting; this would entail an equivalent of 0.95 euros/share to be paid out in 2019. Furthermore, it also completed a reduction in equity through share buyback, in a volume equivalent to the shares issued in 2018 as a result of the scrip dividend, which represents an additional increase in earnings per share.
|Corporate and other||(378)||(556)||(178)|
|Adjusted net income||2,131||2,352||221|
The company plans to increase shareholder return until one euro per share is reached in 2020, with a complete buyback of the shares issued due to the scrip dividends for their amortization. All of this places shareholder return among the highest in the industry.
Repsol's good performance was reflected in the improvement of the company's credit rating. In October, the Fitch agency improved Repsol's outlook to “positive” with a long-term credit rating of BBB. In early December, Moody's announced an increase in the rating to Baa1, with a “stable” outlook and, days later, S&P Global Ratings improved its outlook to “positive” and confirmed the long-term credit rating of BBB.
On the other hand, Repsol continued to make progress on its digitalization program, which will bring in 1 billion euros by 2022, both through new revenue and through the optimization of investments and expenses. It will also provide greater process safety, contribute to reducing emissions, and promote initiatives related to the circular economy.