"Net income for 2005 rose 29.2% to a record EUR3,120 million " Dividend increases 20%, to EUR0.60 per share " Income growth in all business lines, with a 69% jump in Refining " Cash flow was 37.9% up year-on-year, at EUR6,500 million " Net debt fell 16.4%, with a cut of EUR900 million " Reserves audit concludes without new adjustments " Appointment to the Board of two new independent directors, as per EU and the Unified Code of Good Governance recommendations.
Antonio Brufau, Executive Chairman of Repsol YPF, today presided over the companys Annual General Shareholders' Meeting, at which he proposed the approval of a 20% rise in the dividend for 2005, thanks to the good performance posted in what he described as an excellent year, in which the company recorded a record profit.
In his speech, Repsol YPFs Executive Chairman summarized the highlights of the year, in which company profit rose 29.2% to a record EUR3,120 million, shored up by enhanced performance in all the companys business areas, with the result of a 31.5% rise in income from operations, to EUR6,161 million.
Cash flow in 2005 was 37.9% up, at EUR6,480 million, showing the companys great financial strength and capacity for cash generation. This high cash generation made it possible to cut Repsol YPFs debt by 16.4%, to a level of EUR4,513 as of December 2005 (that is EUR885 million less than the figure for December 2004), and was more than sufficient to finance the investments committed in the period.
Growth in all business areas
Mr. Brufau pointed out that all the business lines posted excellent results, and made special mention of the outstanding performance by the Refining & Marketing area, where income rose 69.3% year-on-year to EUR2,683 million, boosted by a 48.2% improvement in refining margins.
Income from Exploration & Production operations rose 6% year-on-year, from the EUR3,062 million posted in 2004 to EUR3,246 million in 2005. In Chemicals, income from operations was EUR308 million in comparison to EUR262 million the year before, showing a rise of 17.6%, whereas in Gas & Power, income from operations was up 25.5%, from EUR310 million in 2004 to EUR389 million in 2005.
The Executive Chairman also mentioned the good performance of Repsol YPF shares on the stock market during 2005, with a revaluation of almost 29%, outperforming the Ibex-35 by nearly 8 points and the Eurostoxx 50 by over 10 points.
In view of the companys positive income statement for 2005 and the favourable evolution of the Repsol YPF share price, on 29 March 2006, the Board of Directors resolved to propose to the Annual General Shareholders Meeting that a gross dividend of EUR0.60 per share be paid out against the 2005 financial year, equivalent to a 20% dividend increase year-on-year. This dividend rise is in line with the companys policy of sustained growth in shareholder return. If the EUR0.60 dividend payment is added to the aforementioned 29% stock market revaluation, total shareholder income was 31.4%.
Upward trend in 2006
In relation to the first quarter 2006, Repsol YPFs Chairman emphasised that the companys reported net income was 8.2% higher than in first quarter 2004, at EUR862 million, with EBITDA (earnings before interest, tax, depreciations and amortizations) 15% up year-on-year, at EUR2,354 million, and earnings per share at EUR0.71 versus EUR0.65 in first quarter 2005.
In 2005, important steps were taken to strengthen Repsol YPFs Corporate Governance and place it on a par with those using the best international practices in this sphere. In April 2005, an important decision was taken in this respect to increase the functions of the Board of Directors Audit and Control Committee, and include among these a responsibility for the overseeing and control of reserves, and fulfilment of the environmental and safety policy.
In consonance with this role of supervision, in January 2006, Repsol YPF made a downward reserves revision of 1,254 million barrels of oil equivalent (boe). The largest part of this revision, 659 million boe (52%), affected Bolivia where the company has suffered considerably from certain political, economic and legal uncertainties. Adjustments of 509 million boe (41%) were also made in Argentina, and there was a cut of 86 million boe in the rest of the world, nearly two thirds of which corresponds to Venezuela.
Closure of reserves adjustment
Repsol YPFs Audit and Control Committee hired the independent law firm, King & Spalding, to conduct a report to clarify the circumstances that led to the aforementioned reserves revision. On terminating this task, one of the reports conclusions was that the revision process conducted by Repsol YPF in 2005 was correct and the reserves cut was carried out in compliance with external auditors recommendations, and was the result of new procedures introduced by the current management team to evaluate the technical and commercial aspects of these reserves.
The report also mentions that the evaluation in the past of the reserves of certain fields, which although incorrect on occasions, was not motivated by a desire for personal benefit. King & Spaldings report also concludes that the changes introduced by Repsol YPF in the control procedures have considerably improved the reporting and reserves control system.
With regard to the effect on accounts of this reserves cut, and in agreement with Repsol YPFs financial auditor, it has been decided that no adjustments will be necessary to the companys Balance Sheet or Profit and Loss Account for 31 December 2005, nor will any restatement of this Balance Sheet or Account be required in the consolidated financial statements for previous years.
New independent directors
In application of the European Commissions latest recommendations on the length of term to be held by independent directors and the Código Unificado de Buen Gobierno (Unified Code of Good Governance) issued by the the Spanish Continuous Stock Market authorities (CNMV), the Annual General Shareholders Meeting has appointed Artur Carulla and Javier Echenique as independent directors, covering the vacancies produced by the exit of Juan Molins and Enrique Aldama, whose terms of office on the Board ended this year.
The AGM also resolved to ratify the new directors of the Board, Paulina Beato and Philippe Reichstul, appointed for a term of four years. The arrival in 2005 of these new directors, specialists in the international energy sector, was the outcome of Repsol YPFs decision to raise the number of independent directors as an additional good governance measure.
We would like to highlight the following events that took place in 2005: