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APA (ASX:APA) share price drops after FY21 half-year result

The APA Group (ASX: APA) share price has dropped 2% in reaction to the release of its FY21 half-year result.

APA is the largest owner of gas pipelines in the country, it supplies around half of the country’s natural gas. It also owns a few renewable energy projects.

FY21 half-year result

APA announced a 7% decrease in underlying profit to $163 million. This was driven lower with revenue down 0.6% to $1.07 billion and EBITDA (EBITDA explained) falling 2.3% to $823 million.

However, there was a statutory loss after tax of $11.7 million. This came about from the impairment of $174.5 million against the Orbost Gas Processing Plant.

Operating cashflow improved by 1.4% to $519 million.

APA management said that this result was solid with strong volume growth in key markets against a backdrop of challenging market conditions. It said the performance demonstrates the underlying strength and resilience of the business and the decision to upgrade its FY21 distribution guidance, reflecting the management’s confidence in APA’s outlook and the capacity that exists on the balance sheet.

FY21 Guidance

APA reconfirmed that its FY21 EBITDA is expected to be between $1.625 billion and $1.665 billion.

It also upgraded its FY21 distribution guidance of 51 cents per share, up 2% compared to FY20.

APA also expects that growth capital expenditure is expected to be over $1 billion between FY21 to FY23. This includes the plan for the business to build a new pipeline in Western Australia. APA is investing $460 million to construct a new 580km pipeline in Western Australia to connect emerging gas fields in the Perth Basin to the resource rich Goldfields region, forming an interconnected WA Gas Grid.

APA management comments

Rob Wheals, the APA CEO and Managing Director said: “We have a significant pipeline of energy infrastructure growth opportunities that align with our purpose, vision and strategy. Our organic growth pipeline is healthy…Further development of new technology projects under APA’s Pathfinder Program will ensure APA can play a leading role in the energy transition.”

Summary thoughts

APA’s share price has dropped significantly over the last few months, down almost 20% since 5 November 2020.

It’s certainly not a ‘growth’ business, but I think the business has a decent future as it builds and invests in new assets. For dividend investors, I think the FY21 distribution yield of 5.6% is an attractive starting point.

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At the time of publishing, the author of this article does not have a financial or commercial interest in any of the companies mentioned.

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