University study material for Accounting, Finance & Control in the Management Engineering degree programme at Politecnico di Milano. The document covers: AFC – Lesson 8: Financial Analysis in Practice – The ENI Case Study Course: Accounting, Finance and Control (AFC) – Politecnico di Milano. This lesson applies the five steps of financial analysis from the Part 1 slides (sources and triangulation, segmental analysis, common-size
University study material for Accounting, Finance & Control in the Management Engineering degree programme at Politecnico di Milano. The document covers: AFC – Lesson 8: Financial Analysis in Practice – The ENI Case Study Course: Accounting, Finance and Control (AFC) – Politecnico di Milano. This lesson applies the five steps of financial analysis from the Part 1 slides (sources and triangulation, segmental analysis, common-size
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AFC – Lesson 8: Financial Analysis in Practice – The ENI Case Study Course: Accounting, Finance and Control (AFC) – Politecnico di Milano. This lesson applies the five steps of financial analysis from the Part 1 slides (sources and triangulation, segmental analysis, common-size analysis, reclassification and adjustments, benchmarking) to the ENI case study (2025 Annual Report figures, € million). All ENI figures below are copied from the case-study slides; derived percentages are computed here. Exam note / caveat: Some ENI slides (common-size tables, charts) are images whose numbers could not be extracted. This lesson therefore recomputes percentages from the figures that ARE readable. Verify them against the slides before the exam. 1. The five-step workflow (what the professor expects) • Step 1 – Sources and triangulation: combine financial disclosures (annual report, quarterly reports, SEC forms such as 10-K, 10-Q, 8-K, 20-F), non-financial disclosures (sustainability report, integrated report), market data (share price, volumes, bond values) and industry/macro data. Cross-check them: no single source is enough. • Step 2 – Segmental analysis (IFRS 8): operating segments of listed companies, with revenue and operating profit per segment. • Step 3 – Common-size analysis: vertical (each line as % of total assets, or of revenues for the income statement) and horizontal (each year as % of a base year). • Step 4 – Reclassification and adjustments: rebuild the statements to show Fixed Capital, NOWC, Net Financial Debt (balance sheet) and Value Added, EBITDA, EBIT (income statement); adjust EBIT/EBITDA/net profit for non-recurring items. • Step 5 – Benchmarking: compare with peers (sector, leader or internal benchmarking), after correcting for scale and context. Then…
Segment Sales Sales Sales Op. profit Op. margin Chg sales 25 2025 2024 2023 2025 2025 vs 24 Corporate and other 2,073 1,905 1,830 -1,499 -72.3% 8.8% Consolidation adjustments -34,866 -38,935 -43,992 Sales from operations 82,151 88,797 93,717 -7.5% Other income and revenues 1,478 2,417 1,099 Total revenues 83,629 91,214 94,816 -8.3% Operating profit by segment (IFRS 8) 2025 2024 2023 Exploration & Production 6,302 6,715 8,693 Global Gas & LNG and Power 1,770 -909 2,626 EniLive and Plenitude 652 1,589 -74 Refining and Chemicals -2,485 -1,681 -2,121 Corporate and other -1,499 -371 -948 Unrealized intragroup profit elimination 270 -105 81 Operating profit (loss) 5,010 5,238 8,257 Answers. Highest revenues: E&P (50,367 in 2025). Highest operating profit: E&P (6,302), and it is also the only segment whose profit is large relative to sales: margin about 12.5%. Refining and Chemicals has negative operating profit in all three years (−2,485 in 2025) despite 18,179 of sales, and Corporate costs are negative by nature (it has no external sales to speak of). Why sales fall from 93,717 (2023) to 82,151 (2025)? Every large segment shows lower sales; the slides ask "why these results?" – the expected reasoning is lower commodity prices and volumes in an oil and gas business. The sum of segment sales (117,017 in 2025) is far above consolidated sales because intragroup sales (−34,866) are eliminated. Never add segment sales and call the total revenue. Exam note / caveat: The sum of segment operating profits (4,740) plus the unrealized-intragroup-profit adjustment (270) gives the group figure 5,010. This reconciliation is an easy exam check. 4. Common-size analysis Vertical. Balance sheet: divide every item by total assets. Income statement: divide by revenues. Total analysis uses total…
Main conclusions. (1) Asset structure: roughly two-thirds of assets are non-current, typical of an oil and gas company. (2) Financing: equity is about 38.5% of total assets in 2025 (52,787 / 137,069), so the group is financed more by liabilities than by equity, but leverage in terms of net debt is moderate (see section 6). (3) Total assets fell 6.7% and non-current assets 14.3% in one year, partly because assets were reclassified as held for sale. Income statement. The slide layout separates operating, financial and fiscal activities. For vertical analysis divide each line by revenues; ENI's costs are dominated by purchases, services and other (80.9% of revenues) with payroll only 5.5% and D&A and impairment 13.6%, a very different mix from Facebook (R&D 38.9%) or IMA (personnel 30.2%). 5. Adjustments Adjustments change a reported number (EBIT, EBITDA, net profit) to remove significant, infrequent items that do not reflect ongoing activity, so that years and companies become comparable. ENI reports adjusted operating profit and adjusted profit (Annual Report 2025 p. 88). Ferrari applies the same rule: adjust only for significant, infrequent items; if no such events occur, no adjustment is needed. • Typical adjusted items: impairments and write-backs, restructuring, disposals gains/losses, inventory holding gains/losses. • Reported vs adjusted: reported 2025 operating profit is 5,010; the adjusted figure is on the slide image and was not readable here. Always state which one you use. • Adjustments are a judgment call: they are not mandatory and different analysts adjust differently. 6. Reclassified balance sheet Structure: Invested capital = Fixed capital + NOWC (− provisions) + net assets held for sale = Net financial debt (D) + Shareholders' equity (E). NOWC = trade…
Balance sheet: PPE 1,200; Intangible assets 145; Inventories 155; Receivables 456; Other current financial assets 305; Cash 78; Total assets 2,339. Liabilities: Capital 100; Reserve 230; Profit 154; Non-current debt 750; Bond 380; Current debt 400; Payables 325; total 2,339. Item Calculation Result Fixed capital 1,200 + 145 1,345 NOWC 155 + 456 − 325 286 Invested capital 1,345 + 286 1,631 Equity 100 + 230 + 154 484 Net financial debt 750 + 380 + 400 − 305 − 78 1,147 Coverage D + E 1,147 + 484 1,631 (matches) Trap: other current financial assets (305) are financial, so they reduce net debt; they are not part of NOWC. Current assets − current liabilities would give a different, wrong "working capital". 8. Income statement reclassification Scheme: Revenues − purchases of raw materials − purchases of services = Value added; − personnel costs = EBITDA; − D&A = EBIT; − net financial expenses = earnings before tax and extraordinary items; ± extraordinary items = pretax income; − tax = net income. The blocks are operating, financial, and fiscal (and extraordinary). Value added shows how much the company adds to external resources through transformation. Use the figures in the exam statement and always check that the result ties back to net income. 9. Benchmarking in brief • Process: objectives, sample selection, involvement modality, performance dimensions, data correction. • Objectives: performance orientation (compare indicators) vs process orientation (compare processes). • Samples: leader (a best-in-class firm on a specific performance or process, e.g. IBM vs FedEx logistics), sector (same industry), internal (units of the same company). • Involvement: unconscious (public data, indirect) vs conscious (competitors cooperate, more precise but needs approval and disclosure).…
A group reports: non-current assets 900, inventories 120, receivables 200, cash 80, equity 450, bonds 300, payables 150, current bank debt 100, other current assets 40. Reclassify and verify. Solution: total assets = 900 + 120 + 200 + 80 + 40 = 1,340. Total liabilities and equity = 450 + 300 + 150 + 100 = 1,000, so 340 is missing; add 340 as a hidden item (e.g. other non-current liabilities) or correct the data before proceeding. This tests the habit of checking the balance first. Assuming the missing 340 is operating payables: fixed capital 900, NOWC = 120 + 200 + 40 − 150 − 340 = −130 (if other current assets are operating), net debt = 300 + 100 − 80 = 320, equity 450, D + E = 770 = 900 − 130. ✓. Mastery checklist: list the five steps; explain consolidated vs single entity; reconcile segment data; compute vertical and horizontal common-size; reclassify a balance sheet and prove D + E; interpret negative NOWC; distinguish reported and adjusted figures; explain the benchmarking process.
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