NOTES TO THE INCOME STATEMENT
After allocating minority interest, the profit earned by the Edison Group in 2005 totaled 500 million euros, compared with a profit of 354 million euros in 2004. The main reasons for this improvement are:
  • Healthy unit sales and the Group's ability to hold margins at a good level in the deregulated market, which offset the negative impact of a decrease in industrial margins caused mainly by the expiration of CIP-6 incentives for some power plants (about 160 million euros), a reduction in hydroelectric production and the stoppage of some power plants.
  • Writedowns booked as a result of an impairment test of property, plant and equipment (81 million euros), net of the reversal of writedowns of some hydrocarbon concessions (12 million euros).
  • A reduction in net financial expense, which fell from 310 million euros to 219 million euros, reflecting a decrease in indebtedness, a decline in the cost of money, a sharp drop in bank fees and the impact of the first-time adoption of IAS 32 and IAS 39.
  • A significantly lower tax burden and a decrease in minority interest made possible by the corporate restructuring programs implemented in recent years.
In order to provide a clearer understanding of the progression that produced the cumulative results at December 31, 2005, the table below shows the Group's performance on a quarter by quarter basis:
  First quarter 2005 (*) Second quarter 2005 Third quarter 2005 Fourth quarter 2005
Sales revenues 1,847 1,456 1,502 1,845
EBITDA 300 306 343 357
as a % of sales revenues 16.2% 21.0% 22.8% 19.3%
Deprec., amortiz. and writedowns (140) (141) (140) (236)
EBIT 160 165 203 121
as a % of sales revenues 8.7% 11.3% 13.5% 6.6%
Group interest in profit 86 112 142 160
(*) The Group did not prepare its report for the first quarter of 2005 in accordance with IAS/IFRS standards. Consequently, the data at March 31,
2005 are those listed in the special disclosure statements included in the report on operations in the first quarter of 2005.
19. Sales Revenues
Sales revenues totaled 6,650 million euros, for a gain of 1,023 million euros (+18.2%) compared with 2004. The Group's core businesses increased sales revenues by 1,053 million euros (+19.7%), thanks to higher unit sales of natural gas and an increase in the average prices charged for natural gas and electric power. Differently from the figure for 2004, which is provided for comparison purposes, this item reflects the valuation of contract work in progress under engineering contracts for the first half of 2005, as required by IAS 11.
The table below provides a breakdown of sales revenues:
(in millions of euros) 2005 2004 Change % change
Revenues from the sales of:        
- Electric power 4,494 3,808 686 18.0%
- Natural gas 1,422 1,001 421 42.1%
- Oil 64 47 17 36.2%
- Steam 145 120 25 20.8%
- Water and other utilities 34 34 - -
- Green certificates 29 20 9 45.0%
- Management of the electric network 36 38 (2) (5.3%)
- Other revenues 25 48 (23) (47.9%)
Total sales revenues 6,249 5,116 1,133 22.1%
Recovery of excise taxes - 116 (116) n.a.
Revenues from contract work in progress 214 256 (42) (16.4%)
Transmission revenues 171 121 50 41.3%
Revenues from services provided to outsiders 16 18 (2) (11,1%)
Total for the Group 6,650 5,627 1,023 18.2%
Excise taxes, which in previous years were included among sales revenues and raw materials and services used, are netted out and shown at their net value in the 2005 financial statements.
Sales revenues were generated mainly in Italy. Foreign revenues reflect primarily sales of the Tecnimont Group in the first six months of 2005.
A breakdown of revenues by geographic region is provided below.
Sales Revenues by Geographic Region
(in millions of euros) 2005 2004
Italy 6,247 4,760
France 84 58
Spain - 3
Other euro-zone countries 24 70
Total euro-zone countries 6,355 4,891
Other EU countries 69 143
Eastern Europe 10 10
Latin America 58 49
Africa 61 183
Asia 97 351
Total for the Group 6,650 5,627
Sales Revenues by Business
(in millions of euros) 2005 2004 Change % change
Electric Power operations 4,993 4,304 689 16.0%
Hydrocarbons operation 3,303 2,231 1,072 48.1%
Corporate activities 42 62 (20) (32.3%)
Eliminations (1,940) (1,253) (687) 54.8%
Core businesses 6,398 5,344 1,054 19.7%
Water 31 27 4 14.8%
Other operations 31 27 4 14.8%
Engineering 221 256 (35) (13.7%)
Divested operations 221 256 (35) (13.7%)
Total for the Group 6,650 5,627 1,023 18.2%