TransAlta Corp reports 668% Net Income growth and 14.4 pp EBITDA Margin growth from 33.2% to 47.6%
03.03.2017 • About TransAlta Corp (
$TA) • By InTwits
TransAlta Corp reported 2016 financial results today. Overall the company's long term financial model is characterised by the following facts:
- TransAlta Corp has high CAPEX intensity: 5 year average CAPEX/Revenue was 22.2%. At the same time it's in pair with industry average of 4.9%.
- CAPEX is quite volatile: 567 in 2016, 706 in 2015, 787 in 2014, 340 in 2013, 166 in 2012
- The company has potentially unprofitable business model: ROIC is at 5.0%
Below you can find a comprehensive analysis of the key data driving the company's performance and stock price.
TransAlta Corp ($TA) key annual financial indicators
| mln. CAD | 2012 | 2013 | 2014 | 2015 | 2016 | 2016/2015 |
|---|
P&L
|
|---|
| Revenue | 2,210 | 2,292 | 2,623 | 2,267 | 2,397 | 5.7% |
| Gross Profit | 1,457 | 1,344 | 1,531 | 1,259 | 1,434 | 13.9% |
| SG&A | 499 | 516 | 542 | 492 | 489 | -0.6% |
| EBITDA | 604 | 780 | 1,037 | 753 | 1,142 | 51.7% |
| Net Income | -584 | -33 | 182 | 22 | 169 | 668.2% |
Balance Sheet
|
|---|
| Cash | 27 | 42 | 43 | 54 | 305 | 464.8% |
| Short Term Debt | 607 | 217 | 751 | 87 | 639 | 634.5% |
| Long Term Debt | 3,610 | 4,130 | 3,305 | 4,408 | 3,722 | -15.6% |
Cash flow
|
|---|
| Capex | 703 | 561 | 487 | 476 | 358 | -24.8% |
Ratios
|
|---|
| Revenue growth | -17.0% | 3.7% | 14.4% | -13.6% | 5.7% | |
| EBITDA growth | -48.7% | 29.1% | 32.9% | -27.4% | 51.7% | |
| Gross Margin | 65.9% | 58.6% | 58.4% | 55.5% | 59.8% | 4.3% |
| EBITDA Margin | 27.3% | 34.0% | 39.5% | 33.2% | 47.6% | 14.4% |
| Net Income Margin | -26.4% | -1.4% | 6.9% | 1.0% | 7.1% | 6.1% |
| SG&A, % of revenue | 22.6% | 22.5% | 20.7% | 21.7% | 20.4% | -1.3% |
| CAPEX, % of revenue | 31.8% | 24.5% | 18.6% | 21.0% | 14.9% | -6.1% |
| ROIC | 0.5% | 2.4% | 5.3% | 1.7% | 5.0% | 3.3% |
| ROE | -24.9% | -3.3% | 6.3% | -1.0% | 4.7% | 5.7% |
| Net Debt/EBITDA | 6.9x | 5.5x | 3.9x | 5.9x | 3.6x | -2.3x |
TransAlta Corp ($TA) key quoterly financial indicators
| mln. CAD | 16Q1 | 16Q2 | 16Q3 | 16Q4 | YoY change |
|---|
P&L
|
|---|
| Revenue | 568 | 492 | 620 | 717 | -4.2% | 12.3% | -3.3% | 20.5% |
| EBITDA | 243 | 202 | 208 | 489 | 9.5% | 59.1% | 34.2% | 96.4% |
| Net Income | 74 | 16 | -2 | 81 | | | -101.2% | |
Balance Sheet
|
|---|
| Cash | 30 | 93 | 157 | 305 | -50.8% | 31.0% | 324.3% | 464.8% |
| Short Term Debt | 103 | 586 | 589 | 639 | -30.4% | 259.5% | 1,153.2% | 634.5% |
| Long Term Debt | 3,927 | 3,528 | 3,533 | 3,722 | -4.5% | -12.9% | -19.8% | -15.6% |
Ratios
|
|---|
| Gross Margin | 63.4% | 64.6% | 51.5% | 60.9% | 3.3% | 10.3% | -1.9% | 6.7% |
| EBITDA Margin | 42.8% | 41.1% | 33.5% | 68.2% | 5.3% | 12.1% | 9.4% | 26.4% |
| Net Income Margin | 13.0% | 3.3% | -0.3% | 11.3% | 17.7% | 30.6% | -26.2% | 18.5% |
Revenue and profitability
The company's Revenue increased on 5.7%. Revenue growth showed acceleration in 16Q4 - it increased 20.5% YoY. Revenue growth happened at the same time with EBITDA margin expansion. EBITDA Margin surged on 14.4 pp from 33.2% to 47.6% in 2016.
Gross Margin increased on 4.3 pp from 55.5% to 59.8% in 2016. SG&A as a % of Revenue decreased slightly on 1.3 pp from 21.7% to 20.4% in 2016.
Net Income marign increased on 6.1 pp from 0.97% to 7.1% in 2016.
Capital expenditures (CAPEX) and working capital investments
TransAlta Corp's CAPEX/Revenue was 14.9% in 2016. TransAlta Corp showed decline in CAPEX/Revenue of 9.5 pp from 24.5% in 2013 to 14.9% in 2016. It's average level of CAPEX/Revenue for the last three years was 18.2%.
Return on investment
The company operates at low ROIC (4.99%) and ROE (4.69%). ROIC increased on 3.3 pp from 1.7% to 5.0% in 2016. ROE increased on 5.7 pp from -1.0% to 4.7% in 2016.
Leverage (Debt)
Company's Net Debt / EBITDA is 3.6x and Debt / EBITDA is 3.8x. Net Debt / EBITDA dropped on 2.3x from 5.9x to 3.6x in 2016. Debt decreased on 3.0% while cash surged on 465%.
Management team
Dawn L Farrell is a the company's CEO. Dawn L Farrell is a founder and has spent 6 years at the company. TransAlta Corp's CFO Donald Tremblay has spent 4 years at the company.
Appendix 1: Peers in Utilities
Below you can find TransAlta Corp benchmarking vs. other companies in Utilities industry. It's shown for the period of 5 years for the key financial metrics. Each table has median value for all the companies in the industry together with individual financial data of the top-5 companies in the industry by particular financial metric.
Top companies by Revenue growth, %
| Top 5 | FY2012 | FY2013 | FY2014 | FY2015 | FY2016 |
|---|
| Emera Inc ($EMA) | | 8.3% | 31.8% | -5.1% | 53.3% |
| Northland Power Inc ($NPI) | | 54.1% | 36.4% | -4.2% | 50.9% |
| Boralex Inc ($BLX) | | -6.7% | 13.5% | 37.1% | 11.7% |
| Algonquin Power & Utilities Corp ($AQN) | | 93.6% | 39.4% | 9.2% | 6.6% |
| Canadian Utilities Ltd ($CU) | | 11.3% | 6.5% | -9.3% | 4.1% |
| |
|---|
| Median (14 companies) | | 11.0% | 10.6% | -5.1% | 0.2% |
|---|
| TransAlta Corp ($TA) | | 3.7% | 14.4% | -13.6% | 5.7% |
Top companies by Gross margin, %
| Top 5 | FY2012 | FY2013 | FY2014 | FY2015 | FY2016 |
|---|
| Atco Ltd/Canada ($ACO.X) | 85.6% | 85.1% | 82.3% | 85.0% | 88.8% |
| Canadian Utilities Ltd ($CU) | 81.0% | 80.8% | 77.7% | 81.0% | 86.6% |
| Northland Power Inc ($NPI) | 52.5% | 63.7% | 61.8% | 69.0% | 82.4% |
| GWR Global Water Resources Corp ($GWR) | | | | 77.8% | 79.2% |
| Fortis Inc/Canada ($FTS) | 34.6% | 34.4% | 59.3% | 61.7% | 65.8% |
| |
|---|
| Median (12 companies) | 34.2% | 36.1% | 45.5% | 61.4% | 61.6% |
|---|
| TransAlta Corp ($TA) | 65.9% | 58.6% | 58.4% | 55.5% | 59.8% |
Top companies by EBITDA margin, %
| Top 5 | FY2012 | FY2013 | FY2014 | FY2015 | FY2016 |
|---|
| Northland Power Inc ($NPI) | 54.2% | 52.4% | 51.2% | 57.5% | 68.8% |
| Canadian Utilities Ltd ($CU) | 45.9% | 45.7% | 47.4% | 45.8% | 53.5% |
| Atco Ltd/Canada ($ACO.X) | 39.8% | 41.0% | 41.4% | 38.7% | 47.7% |
| Algonquin Power & Utilities Corp ($AQN) | 26.1% | 29.5% | 26.7% | 32.5% | 39.3% |
| GWR Global Water Resources Corp ($GWR) | | | | 46.1% | 38.8% |
| |
|---|
| Median (12 companies) | 31.1% | 34.0% | 33.6% | 35.4% | 35.4% |
|---|
| TransAlta Corp ($TA) | 27.3% | 34.0% | 39.5% | 33.2% | 47.6% |
Top companies by CAPEX/Revenue, %
| Top 5 | FY2012 | FY2013 | FY2014 | FY2015 | FY2016 |
|---|
| Northland Power Inc ($NPI) | 84.0% | 60.2% | 238.7% | 265.9% | 148.0% |
| Algonquin Power & Utilities Corp ($AQN) | 21.7% | 23.5% | 45.9% | 19.9% | 37.0% |
| Canadian Utilities Ltd ($CU) | 70.7% | 66.4% | 58.5% | 47.2% | 35.4% |
| Atco Ltd/Canada ($ACO.X) | 58.8% | 54.2% | 48.3% | 39.6% | 33.1% |
| Caribbean Utilities Co Ltd ($CUP.U) | 13.8% | 13.0% | 17.0% | 41.3% | 29.2% |
| |
|---|
| Median (12 companies) | 31.4% | 29.0% | 21.7% | 24.6% | 28.4% |
|---|
| TransAlta Corp ($TA) | 31.8% | 24.5% | 18.6% | 21.0% | 14.9% |
Top companies by ROIC, %
| Top 5 | FY2012 | FY2013 | FY2014 | FY2015 | FY2016 |
|---|
| Keyera Corp ($KEY) | 13.8% | 12.7% | 14.3% | 12.6% | 10.5% |
| Atco Ltd/Canada ($ACO.X) | 10.8% | 10.5% | 9.6% | 5.6% | 8.1% |
| Canadian Utilities Ltd ($CU) | 10.0% | 9.4% | 9.2% | 5.9% | 8.0% |
| Northland Power Inc ($NPI) | 6.0% | 7.4% | 7.2% | 5.3% | 7.3% |
| Caribbean Utilities Co Ltd ($CUP.U) | 5.8% | 6.3% | 6.1% | 5.7% | 5.8% |
| |
|---|
| Median (14 companies) | 5.3% | 6.0% | 5.1% | 5.4% | 4.3% |
|---|
| TransAlta Corp ($TA) | 0.5% | 2.4% | 5.3% | 1.7% | 5.0% |
Top companies by Net Debt / EBITDA
| Top 5 | FY2012 | FY2013 | FY2014 | FY2015 | FY2016 |
|---|
| Atlantic Power Corp ($ATP) | 12.6x | 13.0x | 22.4x | 251.1x | 24.3x |
| Emera Inc ($EMA) | 5.7x | 5.6x | 3.8x | 4.3x | 13.3x |
| Algonquin Power & Utilities Corp ($AQN) | 7.9x | 6.2x | 5.0x | 4.1x | 9.7x |
| Fortis Inc/Canada ($FTS) | 5.0x | 5.6x | 6.7x | 5.3x | 9.2x |
| GWR Global Water Resources Corp ($GWR) | | | | 6.3x | 8.1x |
| |
|---|
| Median (11 companies) | 5.0x | 5.2x | 4.6x | 5.0x | 7.8x |
|---|
| TransAlta Corp ($TA) | 6.9x | 5.5x | 3.9x | 5.9x | 3.6x |
