TransAlta Corp reports 87.9% Net Income decline and 6.3 pp EBITDA Margin decline from 39.5% to 33.2%
18.02.2016 • About TransAlta Corp (
$TA) • By InTwits
TransAlta Corp reported 2015 financial results today. Overall the company's long term financial model is characterised by the following facts:
- TransAlta Corp is a company in decline: 2015 revenue growth was -13.6%, 5 years revenue CAGR was -3.2%
- TransAlta Corp has high CAPEX intensity: 5 year average CAPEX/Revenue was 22.6%. At the same time it's in pair with industry average of 4.0%.
- CAPEX is quite volatile: 38.1 in 2015, 42.7 in 2014, 52.6 in 2013, 22.7 in 2012, 21.8 in 2011
- The company has potentially unprofitable business model: ROIC is at 1.7%
- It operates with medium-size leverage: Net Debt/EBITDA is 5.9x while industry average is 6.2x
Below you can find a comprehensive analysis of the key data driving the company's performance and stock price.
TransAlta Corp ($TA) key annual financial indicators
| mln. CAD | 2011 | 2012 | 2013 | 2014 | 2015 | 2015/2014 |
|---|
P&L
|
|---|
| Revenue | 2,663 | 2,210 | 2,292 | 2,623 | 2,267 | -13.6% |
| Gross Profit | 1,716 | 1,457 | 1,344 | 1,531 | 1,259 | -17.8% |
| SG&A | 545 | 499 | 516 | 542 | 492 | -9.2% |
| EBITDA | 1,177 | 604 | 780 | 1,037 | 753 | -27.4% |
| Net Income | 305 | -584 | -33 | 182 | 22 | -87.9% |
Balance Sheet
|
|---|
| Cash | 49 | 27 | 42 | 43 | 54 | 25.6% |
| Short Term Debt | 316 | 607 | 217 | 751 | 87 | -88.4% |
| Long Term Debt | 3,721 | 3,610 | 4,130 | 3,305 | 4,408 | 33.4% |
Cash flow
|
|---|
| Capex | 453 | 703 | 561 | 487 | 476 | -2.3% |
Ratios
|
|---|
| Revenue growth | -0.4% | -17.0% | 3.7% | 14.4% | -13.6% | |
| EBITDA growth | 17.9% | -48.7% | 29.1% | 32.9% | -27.4% | |
| Gross Margin | 64.4% | 65.9% | 58.6% | 58.4% | 55.5% | -2.8% |
| EBITDA Margin | 44.2% | 27.3% | 34.0% | 39.5% | 33.2% | -6.3% |
| Net Income Margin | 11.5% | -26.4% | -1.4% | 6.9% | 1.0% | -6.0% |
| SG&A, % of revenue | 20.5% | 22.6% | 22.5% | 20.7% | 21.7% | 1.0% |
| CAPEX, % of revenue | 17.0% | 31.8% | 24.5% | 18.6% | 21.0% | 2.4% |
| ROIC | 8.0% | 0.5% | 2.4% | 5.3% | 1.7% | -3.7% |
| ROE | 10.5% | -24.9% | -3.3% | 6.3% | -1.0% | -7.3% |
| Net Debt/EBITDA | 3.4x | 6.9x | 5.5x | 3.9x | 5.9x | 2.0x |
Revenue and profitability
The company's Revenue dropped on 13.6% in 2015. Revenue decline was worsened by EBITDA margin decline. EBITDA Margin decreased on 6.3 pp from 39.5% to 33.2% in 2015.
Gross Margin decreased on 2.8 pp from 58.4% to 55.5% in 2015. SG&A as a % of Revenue increased slightly on 1.0 pp from 20.7% to 21.7% in 2015.
Net Income marign decreased on 6.0 pp from 6.9% to 0.97% in 2015.
Capital expenditures (CAPEX) and working capital investments
The company's CAPEX/Revenue was 21.0% in 2015. CAPEX/Revenue dropped on 10.8 pp from 31.8% in 2012 to 21.0% in 2015. Average CAPEX/Revenue for the last three years was 21.3%.The company invested a big chunk of EBITDA (63.2%) to CAPEX which didn't stop revenue from falling.
Return on investment
The company operates at low but positive ROIC (1.66%) and negative ROE (-1.01%). ROIC decreased on 3.7 pp from 5.3% to 1.7% in 2015. ROE decreased on 7.3 pp from 6.3% to -1.0% in 2015.
Leverage (Debt)
Debt level is 5.9x Net Debt / EBITDA and 6.0x Debt / EBITDA. Net Debt / EBITDA jumped on 2.0x from 3.9x to 5.9x in 2015. Debt surged on 10.8% in 2015 while cash jumped on 25.6% in 2015.
Management team
The company's CEO is Dawn L Farrell. Dawn L Farrell is a founder and has 6 years tenure at the company. The company's CFO is Donald Tremblay. Donald Tremblay has 4 years tenure at the company.
Appendix 1: Peers in Utilities
Below we provide TransAlta Corp benchmarking against other companies in Utilities industry for the last 5 years. We show data for the top-5 companies by key financial metric together with the median value for all the companies in the industry.
Top companies by Revenue growth, %
| Top 5 | FY2011 | FY2012 | FY2013 | FY2014 | FY2015 |
|---|
| Algonquin Power & Utilities Corp ($AQN) | 50.1% | 28.8% | 93.6% | 39.4% | |
| Northland Power Inc ($NPI) | 14.0% | 1.5% | 54.1% | 36.4% | |
| Fortis Inc/Canada ($FTS) | | -2.2% | 10.8% | 33.5% | 25.1% |
| Emera Inc ($EMA) | | -0.3% | 8.3% | 31.8% | -5.1% |
| Just Energy Group Inc ($JE) | | -10.1% | 13.4% | 17.4% | 10.2% |
| |
|---|
| Median (14 companies) | 14.2% | 0.9% | 11.1% | 11.9% | -2.0% |
|---|
| TransAlta Corp ($TA) | | -17.0% | 3.7% | 14.4% | -13.6% |
Top companies by Gross margin, %
| Top 5 | FY2011 | FY2012 | FY2013 | FY2014 | FY2015 |
|---|
| Atco Ltd/Canada ($ACO.X) | 82.3% | 85.6% | 85.1% | 82.3% | |
| Canadian Utilities Ltd ($CU) | 76.5% | 81.0% | 80.8% | 77.7% | |
| Northland Power Inc ($NPI) | 47.7% | 52.5% | 63.7% | 61.8% | |
| Fortis Inc/Canada ($FTS) | 31.9% | 34.6% | 34.4% | 59.3% | 61.7% |
| Capital Power Corp ($CPX) | 48.9% | 58.9% | 59.8% | 58.4% | 61.4% |
| |
|---|
| Median (13 companies) | 35.9% | 33.7% | 35.1% | 36.1% | 46.8% |
|---|
| TransAlta Corp ($TA) | 64.4% | 65.9% | 58.6% | 58.4% | 55.5% |
Top companies by EBITDA margin, %
| Top 5 | FY2011 | FY2012 | FY2013 | FY2014 | FY2015 |
|---|
| Boralex Inc ($BLX) | 51.8% | 52.8% | 58.4% | 55.9% | |
| Northland Power Inc ($NPI) | 48.1% | 54.2% | 52.4% | 51.2% | |
| US Geothermal Inc ($GTH) | -84.0% | -129.5% | 52.9% | 49.6% | |
| Canadian Utilities Ltd ($CU) | 42.9% | 45.9% | 45.7% | 47.4% | |
| Atco Ltd/Canada ($ACO.X) | 36.7% | 39.8% | 41.0% | 41.4% | |
| |
|---|
| Median (14 companies) | 29.6% | 29.7% | 33.2% | 32.4% | 29.1% |
|---|
| TransAlta Corp ($TA) | 44.2% | 27.3% | 34.0% | 39.5% | 33.2% |
Top companies by CAPEX/Revenue, %
| Top 5 | FY2011 | FY2012 | FY2013 | FY2014 | FY2015 |
|---|
| Northland Power Inc ($NPI) | 101.7% | 84.0% | 60.2% | 238.7% | |
| Boralex Inc ($BLX) | 17.7% | 5.6% | 62.5% | 85.9% | |
| Canadian Utilities Ltd ($CU) | 43.7% | 70.7% | 66.4% | 58.5% | |
| Atco Ltd/Canada ($ACO.X) | 36.2% | 58.8% | 54.2% | 48.3% | |
| Algonquin Power & Utilities Corp ($AQN) | 22.4% | 21.7% | 23.5% | 45.9% | |
| |
|---|
| Median (14 companies) | 25.4% | 26.5% | 26.2% | 21.2% | 20.6% |
|---|
| TransAlta Corp ($TA) | 17.0% | 31.8% | 24.5% | 18.6% | 21.0% |
Top companies by ROIC, %
| Top 5 | FY2011 | FY2012 | FY2013 | FY2014 | FY2015 |
|---|
| Keyera Corp ($KEY) | 13.1% | 13.8% | 12.7% | 14.3% | 12.6% |
| Just Energy Group Inc ($JE) | 146.5% | 18.6% | 6.0% | 10.6% | 17.9% |
| Atco Ltd/Canada ($ACO.X) | 11.6% | 10.8% | 10.5% | 9.6% | |
| Canadian Utilities Ltd ($CU) | 10.9% | 10.0% | 9.4% | 9.2% | |
| Emera Inc ($EMA) | 6.1% | 5.8% | 5.9% | 8.4% | 5.6% |
| |
|---|
| Median (14 companies) | 6.6% | 5.8% | 6.1% | 5.8% | 5.9% |
|---|
| TransAlta Corp ($TA) | 8.0% | 0.5% | 2.4% | 5.3% | 1.7% |
Top companies by Net Debt / EBITDA
| Top 5 | FY2011 | FY2012 | FY2013 | FY2014 | FY2015 |
|---|
| Atlantic Power Corp ($ATP) | 44.8x | 12.6x | 13.0x | 22.4x | |
| Boralex Inc ($BLX) | 5.9x | 6.6x | 7.6x | 12.1x | |
| Northland Power Inc ($NPI) | 5.9x | 6.4x | 5.8x | 6.9x | |
| Fortis Inc/Canada ($FTS) | 5.3x | 5.0x | 5.6x | 6.7x | 5.3x |
| Just Energy Group Inc ($JE) | 2.5x | 4.3x | 7.4x | 6.4x | 3.9x |
| |
|---|
| Median (14 companies) | 4.5x | 4.9x | 5.4x | 4.8x | 4.1x |
|---|
| TransAlta Corp ($TA) | 3.4x | 6.9x | 5.5x | 3.9x | 5.9x |
