Corporate profits hold up: banking and energy pull the bandwagon of results

On the afternoon of Tuesday, February 28, the CNMV website was fuming.

The term for listed Spanish companies to report their accounts expired and the presentations of results accumulated in the digital mailbox of the stock market supervisor.

Among the usual glut of figures on sales, ebitdas and profits, Ferrovial took the opportunity to plant a bombshell: it will move its headquarters to the Netherlands to, among other reasons, guarantee legal certainty.

The news not only obscured the fact that the profits of the Del Pino family's construction and services group had plummeted 84% in 2022, but also immediately put in the background a campaign of business results that came very close to beating historical record despite adversities.

Spanish companies with a presence on the stock market earned an aggregate of 61,528 million euros last year.

This amount represents a fall of 5.74% with respect to the previous year.

The pushback, however, has fine print.

First of all because the accounts are compared with 2021, the year in which the highest profit figure was reached since there is data.

In addition, that year some of the largest national companies benefited from extraordinary notes that distort any analysis, since in 2022 they did not enjoy these atypical ones.

One of these cases was that of Telefónica.

The net result of the operator fell 75% because in 2021 it achieved historic profits from the sale of Texius towers or the merger of 02 and Virgin Media in the United Kingdom.

Something similar is happening at ACS, which has seen its profits fall by 78% after parting with Cobra, its industrial services subsidiary, a year earlier.

The atypical ones also distort the accounts of Caixabank, where profit fell by 39% due to the accounting impact that surfaced after the merger with Bankia.

The impact of the extraordinary ones on some of the heavyweights of the parquet also explains why the aggregate net result in the Ibex 35 fell by 9.33% in 2022, standing at 51,927 million euros, while the accumulated profits of listed companies of medium and small size grew by 19.96%, up to 9,600 million.

Not bad for a year that was marked by the triple economic impact of the Russian invasion of Ukraine: high inflationary pressure induced largely by the energy shock;

a reaction to forced marches by central banks through accelerated rises in interest rates to curb price increases;

and a notable economic slowdown in the world's major economies largely caused by the first two factors.

As the saying goes, the companies had to plow with the oxen they had at their disposal and the harvest, despite everything, was remarkable.

The resilience of the income statements can be seen above all in the strength shown by sales, the true corporate blood flow.

Listed groups billed 746,680 million euros in 2022, 28.9% more.

In this case, the turnover was widespread both among large and smaller companies.

Sales on the Ibex grew by 32.11%, to 584,933 million.

In the case of the income of the rest of the companies in the continuous market, these stood at 161,746 million, 18.5% higher than those obtained in 2021.

The 'Railway doctrine'

In addition, the billing showed the same vigor both in the businesses located here and in the international ones.

The Ibex 35 companies, for example, generated income in the national market worth 189,013 million euros, 41.31% more.

Spain represented 37.11% of the total turnover in 2022. For their part, foreign subsidiaries registered sales valued at 320,342 million, 35.35% more, and already contribute 62.89% of the total business.

The number of companies that have half or more of their activity in international markets is growing.

Returning to the

l, the company argues for the transfer of headquarters that more than 80% of its income is already generated outside of Spain.

In the Ibex, in addition to the Del Pino family group, there are 11 more companies (Acerinox, ACS, Amadeus, Banco Santander, BBVA, Cellnex, Fluidra, Grifols, IAG, Iberdrola and Inditex), with foreign sales that exceed 80% of the total and none considers moving their headquarters.

Along with the strength of the billing, the other item in the income statement that confirms the strength of the corporate figures is the operating profit.

This item comes to distill the purest juice of the results by discounting current expenses from sales (not counting taxes, interest or amortization).

In 2022, the joint operating result of the members of the Spanish Stock Exchanges was 96,474 million euros, 29.7% more than in 2021.

The president of Santander, Ana Botín, and the CEO, Héctor Grisi, before the presentation of 2022 results, on February 2 in Madrid.

Pablo Blazquez Dominguez (Getty Images) (Getty Images)

Two have been the main sectors of the results campaign: banking and energy.

And they have been both because of the strength of their accounts and because of the controversy surrounding the new government taxes to tax their benefits.

In the case of energy, the star has been Repsol.

The oil company had one of the best years in its history (the war in Ukraine shot up oil and gas prices for a good part of 2022) and recorded a net profit of 4,251 million, 70% more.

In the information sent to the CNMV, the CEO of Repsol took the opportunity to criticize the Executive's fiscal policy: "The social debate on corporate profits must be put in context," explained Josu Jon Imaz.

“Populist messages only serve to hinder business activity,

Another energy group that presented a significant improvement in earnings was Naturgy.

The gas company led by Francisco Reynés achieved a net profit of 1,649 million, 35.8% more, thanks to the rise in energy prices in international markets.

In the case of Iberdrola, the net result was 4,338 million, 11.6% higher than in 2021. The electric company chaired by Ignacio Sánchez Galán broke its profit record thanks to the boost of its activities in Brazil and the US, which offset the lower contribution of the businesses in Spain and Mexico.

For its part, Endesa improved its profits by 77%, up to 2,541 million, thanks to the high prices of electricity and gas.

The other engine of results among listed companies has been the banking sector.

After a decade purging the excesses of the financial crisis and with interest rates close to zero, entities have welcomed the sudden turn of the helm made by the European Central Bank like rain in May.

The rise in the price of money, which has negative consequences for most sectors by curbing consumption, slowing down the economy and triggering financial costs, has, however, been very good for the financial sector.

Banks' spread—the difference between what they pay to raise funds and what they charge to lend money—has benefited from the new interest rate environment.

In this new monetary context, Banco Santander has risen to first place as the Spanish company that earned the most in 2022: 9,605 million euros, 18.2% more.

"It was a very good year, we increased the customer base and we maintained a very solid balance sheet," stressed Ana Botín, president of the entity.

BBVA also had a great year.

The bank led by Carlos Torres earned more money than ever: 6,420 million, 38% more, thanks above all to the strength of his business in Mexico, which already contributes 65% of the profits of the entire group.

Companies linked to the tourism sector also had a good year.

The pandemic was losing strength throughout 2022 and with it normality returned to travel.

An example of this recovery after the covid is Meliá Hotels, which earned 110 million euros compared to losses of 192 million in 2021. “Last was an atypical year in which, after a first quarter highly conditioned by the Ómicron variant, tourist activity experienced an accelerated recovery.

The stagnant demand and the accumulated desire to travel favored the evolution of the business”, summarized Gabriel Escarrer, Executive Vice President and CEO of Meliá.

The other large listed hotel company, NH, also came out of losses with profits of 100 million.

The drastic drop in covid infections was also very good for businesses linked to air transport.

IAG, the

that includes British Airways and Iberia, scored a profit of 431 million when in 2021 its red numbers were 2,932 million.

Another example of this recovery in the number of travelers is Aena.

The manager of the Spanish airports achieved a net result of 901 million when a year before its losses were 475 million.

Salaries that do fight inflation

In February, prices in Spain rose by 6.1%, two tenths above the data registered in January.

Inflation is a headache for thousands of families who see their purchasing power take a big bite.

Many companies drag their feet when it comes to offsetting the impact of the CPI on their employees' payrolls, although in the noble plants of those same companies that resistance is much less.

The boards of directors of the Ibex 35 companies (not counting Inditex, which has not yet provided its annual data, nor ArcelorMittal) obtained an aggregate remuneration of 274 million euros in 2022, an amount that represents an increase of 3.8% compared to the salary bill of 2021. Fluidra, due to a payment in shares to its executive directors, was the one that saw the salary of its board increase the most, 254%.

In addition to the swimming pool manufacturer, the remuneration of the boards of Colonial (133%), Acerinox (62.7%) and Acciona Energía (25%) also experienced notable increases.

The salary bonanza of the domes was even juicier among the members of the senior management of the Ibex 35 companies. This elite group jointly received 398 million last year, a figure that represents an increase of 6.1%.

Fluidra is once again the leader in salary increases, since its senior managers received a total of 26.7 million euros, 577% more.

After the Catalan company, the highest salary increases for managers occurred at Acerinox (82%), Meliá (63%) and Logista (53%).

From an individual point of view, and while waiting to find out the compensation that Pablo Isla received after his departure from Inditex last year, the highest salary in the Spanish market in 2022 was that of the president of Iberdrola.

Ignacio Sánchez Galán received a total of 13.06 million.

A short distance behind were the president of Banco Santander, Ana Botín, with 11.73 million, and the former CEO of the entity, José Antonio Álvarez, with 9.57 million.

The president of Sacyr, Manuel Manrique, received between salary and pension 9.23 million euros.

More debt despite rising interest rates

Action Reaction.

The central banks of the main economies are raising interest rates rapidly to cool inflation that, far from being put down, seems to be reviving again.

In this environment, financing becomes more expensive for both individuals and companies.

Despite the greater tensions in the credit market, the non-financial groups of the Ibex 35 increased their net debt in 2022. As of last December 31, these companies owed a total of 178,056 million euros, an amount that represents an increase of 5, 27% over the figure of a year earlier.

The company that increased its financial debt the most last year was Grifols.

The manufacturer of blood products accumulates commitments worth 9,191 million, 57% more.

In the presentation of its accounts, the Catalan company highlights that, as a result of the greater generation of EBITDA, the leverage ratio has gone from 9 times to 7.1 despite the increase in debt.

Another of the companies that have increased their liabilities the most is Cellnex.

The telecommunications tower manager owes 19,838 million, 35.7% more.

The group still led by Tobías Martínez highlights in its presentation to investors that 77% of its debt is at a fixed rate.

In the Ibex not everything was debt increases last year.

Many index members reduced their commitments significantly.

The case of Repsol stands out.

The oil company, thanks to the high prices of crude oil, obtained one of the best results in its history in 2022 and managed to reduce its debt by 60%, leaving it at 2,256 million.

Inditex is the group that has the most cash (the opposite of debt): 9,980 million. 

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