Plunging UniCredit shares push Ipic into first half loss

The Abu Dhabi investment company said the net loss attributable to equity owners stood at US$257.5 million compared with a net profit of $1.07 billion a year earlier.

Ipic owns a five per cent stake in Italian lender UniCredit. Olivier MORIN

International Petroleum Investment Company (Ipic), which is merging with Abu Dhabi investment fund Mubadala Development, swung to a first-half loss because of the plunge in shares of Italian lender UniCredit, in which it holds a 5 per cent stake.

Net loss attributable to equity owners stood at US$257.5 million compared with a net profit of $1.07 billion a year earlier, according to the Abu Dhabi investment company’s financial results released today.

Revenue fell by 13.8 per cent to $16bn from $18.67bn a year earlier.

Ipic recorded a loss of $998m owing to “marking to market” its stake in the Italian lender.

UniCredit shares plummeted by 62 per cent during the first half of this year to €1.97 at the end of June. The Milan-based bank is selling assets to help shore up its capital base and plans to reveal a strategic review next month. Its share price gained this month on speculation of merger talk with French lender Société Générale.

While Ipic’s downstream operations “recorded a healthy margin”, its upstream business suffered from the oil price plunge in the first half.

Oil prices averaged $39.89 per barrel in the first half, nearly a third lower than prices in the same period last year.

“Ipic’s robust operating performance for the first half of 2016 reflects our sound corporate strategy in a challenging global environment for the oil and gas industry,” said Suhail Al Mazrouei, the Minister of Energy and managing director of Ipic. “Ipic continued to generate positive cash flows, benefiting from a strategy of prudent financial management and our long-term strategic investments in a global, diversified portfolio.”

The company’s net cash from operating activities fell by 4.6 per cent to $1.65bn from $1.73bn in the first half of last year.

Ipic’s assets fell slightly to $57.86bn from $58bn at the end of December.

Last year, Ipic posted a $2.7bn loss because of write downs, low prices for resources and difficult market conditions.

Ipic has a stake in Vienna-based energy company OMV and owns Cepsa of Spain, an integrated oil company.

OMV and Ipic are co-owners of Borealis, an Austrian petrochemicals company.

After merging, Ipic and Mubadala would have a worldwide portfolio of investments ranging from energy and aluminium to microchips and renewables. Their merger is part of Abu Dhabi’s effort to diversify its economy beyond oil.

Mubadala Development also swung to a loss in the first half of this year on rising costs.

Its net loss attributable to the owner was Dh4.4bn compared with a profit of Dh625m in the first half of last year.

Mubadala had at the end of the first half assets of Dh233.4bn.

When combined, the merger between Mubadala and Ipic will create a company with total assets exceeding $121bn, according to The National.

The intention to merge the two entities was announced in summer but the details are being hammered out by teams from the two companies, with advice from consultants Bain & Co, as well as branding adviser Landor Associates. The mer­ger is expected to be formalised through an announcement setting out the details before the end of the year.