APA Group (ASX:APA) share price plunges on flat earnings growth in FY21

Challenging the APA Group's share price, the company advised it had faced headwinds in FY21. This is reflected in its financial performance.

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The APA Group (ASX: APA) share price is falling on Wednesday as the energy infrastructure business reported its FY21 earnings.

APA shares are down 1.76% at the time of writing to $9.79 a share.

Let's investigate further.

APA Group share price falls on flat revenue and EBITDA growth

The company outlined its progress over the year, with key takeouts including:

  • Revenue of $2,145 billion, a 0.7% growth year on year
  • Underlying earnings before interest, tax, depreciation and amortisation (EBITDA) of $1,633 billion, a 1.3% decrease from the year prior
  • Net profit after tax (NPAT) of $3.7 million, down from $311.7 million a year ago
  • Free cash flow (FCF) down 5.7% over the year to about $902 million
  • Final distribution of 27 cents per security, up 2%, bringing FY21 total distributions to 51 cents per security

What happened in FY21 for APA Group?

Challenging the APA Group's share price, the company advised it had faced headwinds in FY21. This is reflected in its financial performance.

For example, underlying EBITDA contracted by over 1%. This was due to "increased investment in strategic development opportunities," as per the company.

However, it also stated this figure was down due to higher insurance and compliance costs, and "softer contract renewals in challenging market conditions".

In addition, it recognised NPAT of $3.7 million, a significant down step from $311 million in the year prior. APA stated NPAT was low due to impacts from the "$249.3 million non-cash Orbost impairment charge," alongside an additional $148 million in finance costs with APA's bond and debt maturity redemptions.

Moreover, FCF came in 5.7% behind FY20, explained by a "non-recurring benefit" that occurred last year.

Further, the company announced its final distribution of 27 cents per security. This totals for an FY21 distribution of 51 cents per security, a 2% increase.

Finally, APA's "organic growth pipeline" has now surpassed $1.3 billion, a $300 million gain from the year prior.

What did management say?

APA CEO Rob Wheals said:

In FY21, APA has again delivered stable and reliable earnings in challenging market conditions while at the same time making good progress on our strategy and laying the foundation for future growth.

Speaking on APA's end markets, Wheals added:

Importantly, gas continues to play a critical role in Australia's energy mix, both as a critical source of firming for variable renewable energy and helping ensure Australians will have access to a reliable, and affordable source of energy. Through our Pathfinder Program we have continued our investments in the energy solutions of tomorrow which have the potential to unlock the economic benefits from repurposing our infrastructure assets while ensuring we can continue to respond to the changing energy needs of our customers.

What's next for APA Group?

APA Group forecasts its FY22 distribution to expand by around 4% to 53 cents per security.

In addition, it estimates its "organic growth capex (capital expenditures) to exceed $1.3 billion" over the coming two years.

APA is also underway on its "sustainability roadmap" where it has an ambition of achieving "net-zero emissions" by 2050. According to the report, this program is "now embedded into strategy".

The APA Group share price has climbed 3.2% this year to date, well behind the S&P/ASX 200 Index (ASX: XJO) return of about 14% since 1 January.

The author Zach Bristow has no positions in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of and has recommended APA Group. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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