Earnings call transcript: Empower posts stronger H1 2026 profit as capacity grows By Investing.com

Empower delivered higher profit and steady top-line growth in the first half of 2026, supported by tighter cost control, lower financing costs, and operational efficiencies, even as regional tensions weighed on hospitality demand. Revenue rose 4.5% year over year to AED 1.52 billion, EBITDA increased 7.5% to AED 773 million, and net profit before tax grew 16.1% to AED 514 million. The stock was little changed, up 0.63% to $1.60, and remains near the lower end of its 52-week range of $1.48 to $1.96.

Key takeaways

• Revenue up 4.5% in H1 2026; EBITDA rose faster, signaling improved operating leverage.
• Net profit before tax up 16.1%, aided by lower financing costs and disciplined spending.
• Contracted capacity surpassed 2 million refrigeration tons, reinforcing future growth visibility.
• Net debt to EBITDA at 1.8x, below the 3.0x–4.0x target range.
• Dividend commitment maintained at AED 875 million for 2025 and 2026.

Performance and operations

Management described the first half as resilient in a challenging backdrop. Sequentially, Q2 revenue declined 2.7%, mainly due to softer consumption revenue tied to lower hospitality occupancy; weather had a smaller impact. Q2 EBITDA reached AED 415 million with a margin of 46.7%, broadly consistent with historical second-quarter patterns. Empower continues to leverage its long-term concession model, which underpins visibility on capacity additions and revenue, with builders continuing to sign agreements despite uncertainty.

Financial highlights

• Revenue: AED 1.52 billion, up 4.5% year over year.
• EBITDA: AED 773 million, up 7.5% year over year.
• Net profit before tax: AED 514 million, up 16.1% year over year.
• Q2 EBITDA: AED 415 million; margin 46.7%.
• Net debt: AED 2.99 billion; net debt/EBITDA 1.8x.
• Average cost of debt: approximately 4.5%–5.0%.
• Annual dividend commitment: AED 875 million for 2025 and 2026; coverage around 1.63x.

Earnings context

No formal EPS or revenue forecast comparison was provided. Based on reported figures, profit growth outpaced revenue, reflecting operating efficiencies and lower financing costs. For a business anchored by long-term, contracted revenues, investors often focus on margins, leverage, and cash generation—areas that looked constructive in H1.

Market reaction

Shares saw only a modest move after results, suggesting no strong immediate rerating. Trading near the lower end of the 52-week band indicates lingering caution on near-term growth, though the muted reaction implies results broadly met expectations.

Outlook and guidance

Management expects consumption revenue to rebound in the third quarter and remain solid through the second half, supported by hot and humid summer weather and tourism initiatives in Dubai. Key operational targets were reiterated:

• Connected capacity targeted at 1.76–1.77 million refrigeration tons in 2026.
• Second-half 2026 capacity additions of 49,000–59,000 refrigeration tons.
• 2027 capacity additions of 90,000–100,000 refrigeration tons.
• Capital spending of AED 450–500 million in both 2026 and 2027.
• Pre-insulated pipe sales guided at AED 50 million for 2026, with potential upside.
• Dividend policy for 2027 to be announced at the end of the third quarter.

Management commentary

Leadership emphasized disciplined execution, strong liquidity, and continued optimization of plants. Crossing 2 million refrigeration tons of contracted capacity was highlighted as a milestone that underscores healthy demand for district cooling. Connected capacity stood at 1.71 million tons at midyear, up 51,000 tons year to date, with 17,600 tons added in Q2.

Operational updates included increased use of treated sewage effluent (TSE), now about 15%–17% of water consumption versus 8%–10% in 2025, supporting cost efficiency and sustainability. The company reiterated its stable demand charges and noted lower financing costs as a tailwind. Management remains confident in hitting second-half capacity targets and reported no major construction delays across the pipeline.

Risks and challenges

• Geopolitical uncertainty may continue to pressure hospitality demand.
• Hospitality exposure, roughly 10% of revenue, is sensitive to occupancy trends.
• Capex inflation of 10%–15% from shipping/insurance, though easing is underway.
• Weather variability can skew short-term consumption revenue.
• Execution risk tied to construction timelines and project handovers.

Q&A highlights

• Dividends: The 2027 dividend policy will be disclosed with Q3 results; AED 875 million annual payouts are reaffirmed for 2025–2026.
• Consumption trends: Weather impact in Q2 was minor; lower hospitality occupancy was the primary drag. Management expects a Q3 rebound and healthy H2 consumption.
• Capacity outlook: H2 2026 additions remain on track with no major project delays; contracted-to-connected gap widened, viewed positively as evidence of future demand.
• Operating metrics: Average cost of debt is ~4.5%–5.0%. TSE use is targeted to rise toward 25% by 2030.
• Other topics: Monthly data won’t be provided due to weather-driven volatility; quarterly trends are more informative. Discussions on certain cost pass-throughs continue with relevant authorities. International expansion and M&A remain under evaluation.

Bottom line

Empower’s first half showcased resilient growth, expanding margins, and conservative leverage, with clear capacity milestones and a maintained dividend commitment. While macro headwinds temper near-term sentiment, guidance and pipeline progress point to continued, disciplined growth through 2026–2027.