H126: Strong volumes and margins

Retail & Marketing volumes rose 9% to 3,476k m³, while gross profit increased 16% to €497m and unit gross margin rose 7% to €143/m³. Margin expansion was concentrated in Africa, where unit gross margin increased 28%, while total R&M unit gross margin growth accelerated to c 13% in Q2. Retail & Marketing EBITDA grew 22% to €324m and group EBITDA 18% to €434m. Adjusted operating cash flow declined 19% to €223m as elevated oil prices increased working capital requirements, masking 15% growth in cash generation before working capital.

Guidance raised but allows for H2 normalisation

Rubis raised FY26 EBITDA guidance to €775–825m. The €800m midpoint implies H2 EBITDA of c €366m versus €434m in H1, consistent with some normalisation in volume growth and unit margins. Oil prices remain the main near-term sensitivity to demand and working capital. We raise FY26 and FY27 EBITDA by 4–5% and EPS by c 10%. Management is also taking a more selective approach to solar investment amid political and regulatory uncertainty, with some capex potentially deferred beyond 2027 while maintaining its FY27 EBITDA targets.

Valuation: DCF increases to €45.2/share

Our DCF valuation increases to €45.2/share from €42.0/share as higher earnings and revised near-term capex assumptions more than offset a higher WACC. The stock trades at c 6.5x consensus forward EV/EBITDA, towards the lower end of its historical range. In our view, the market continues to underappreciate the core Energy Distribution business, where H1 demonstrated strong volume growth and higher unit profitability despite elevated oil prices and geopolitical uncertainty, while solar capex phasing points to a more disciplined approach to capital deployment. With 30% upside to our revised DCF, we believe this is not fully reflected in the share price.

Strong H1 reinforces the investment case

Rubis’s investment case is underpinned by sustained volume growth and relatively stable through-cycle margins in Energy Distribution, with additional growth from the expanding bitumen business and exposure to fast-growing Caribbean markets. Photosol adds high-margin, contracted earnings and greater cash-flow visibility, while a more selective approach to solar investment should support near-term group cash generation. Together, these trends contribute to our increased DCF valuation of €45.2/share. At 6.5x consensus forward EV/EBITDA and with 30% upside to our revised DCF, we believe the current valuation does not fully reflect Rubis’s medium-term growth and cash-generation profile.

H1 reinforces the longer-term growth trend in the core Energy Distribution business. Retail & Marketing volumes increased at a c 5% CAGR between FY22 and FY25 before growing 9% in H126, alongside higher unit profitability. Bitumen growth has accelerated from 10% in FY24 to 28% in FY25 and 44% in H126. The new north-west European platform broadens the geographic growth base and contributed to 25% EBITDA growth in Europe, while the established African business continues to expand, with H1 bitumen volumes up 8% excluding Europe.

The Caribbean provides additional medium-term growth exposure. Guyana is already contributing strong fuel-volume growth as its oil-led economy expands, with the IMF forecasting real GDP growth of 16.2% in 2026. Suriname is at an earlier stage of a similar development cycle: GDP growth is forecast at c 4% in 2026–27 before accelerating sharply with the start of offshore oil production expected in 2028. Rising investment and economic activity should support Rubis’s retail, commercial and industrial demand in both markets.

Cash generation is another important element. Energy Distribution has historically maintained relatively stable margins through commodity cycles, reflecting the company’s ability to pass through commodity-price movements. Against a backdrop of elevated oil prices, H1 cash generation before working capital rose 15%, supported by higher volumes and profitability, while reported operating cash flow was obscured by higher oil-price-driven working capital requirements. Photosol is capital-intensive during development, but operating assets generate power EBITDA margins of c 70–75% and benefit from long-term contracted revenues, adding a stable source of earnings and operating cash flow. A more selective pace of investment should therefore reduce near-term cash requirements while Rubis maintains its FY27 EBITDA targets.

H126 results: Earnings growth ahead of volumes

Rubis reported a strong set of H126 results, with Retail & Marketing volumes up 9% y-o-y to 3,476k m³ and gross profit up 16% to €497m. Unit gross margin rose 7% to €143/m³, while Retail & Marketing EBITDA increased 22% to €324m and Energy Distribution EBITDA 15% to €435m, lifting group EBITDA 18% to €434m. Earnings growth therefore materially outpaced volumes, reflecting higher unit profitability as well as volume growth.

The improvement extended below the operating level, with EBIT including joint ventures up 20% to €307m and PBT 19% higher at €258m. Group net income reached €191m, up 17%, despite a higher effective tax rate of 24.7% and increased financing costs. Diluted EPS was €1.85 versus €1.58 in H125.

Cash conversion was weaker, with working capital absorbing €237m compared with €68m in H125, including the €64m competition payment. Excluding this payment, the outflow was €173m, driven mainly by higher oil prices and, to a lesser extent, volumes. While adjusted operating cash flow declined 19% to €223m, cash generation before working capital movements increased by 15% y-o-y to €396m.

Capex was down 17% to €137m, mainly due to lower investment in Renewable Electricity production. Following €253m of dividend payments, including minorities, cash declined to €639m from €757m at end FY25. Net financial debt excluding leases reached €1,466m, while corporate net debt rose to €885m from €602m at end FY25, with leverage increasing to 1.3x from 0.9x, but remaining below 1.4x in H125.

Retail & Marketing: Margin expansion led by Africa

Gross profit increased across all three products, rising 9% for LPG, 13% for fuel and 54% for bitumen. Unit gross margin also improved across the board, by 7% to €238/m³ for LPG, 6% to €108/m³ for fuel and 8% to €169/m³ for bitumen. Bitumen remained the strongest volume driver; excluding the new European business, volumes still rose 8% and gross profit 29%.

The regional margin performance was more differentiated. Africa unit gross margin rose 28% to €119/m³, driving much of the group-wide improvement, while Europe declined 7% to €226/m³ and the Caribbean 4% to €134/m³. Management attributed the African improvement to better retail margins in East Africa, including the regulated margin adjustment in Kenya and improved unit margins in Zambia, alongside stronger fuel, LPG and bitumen performance. It described these margin improvements as structural rather than inventory-related. Europe’s profitability was diluted by the ramp-up of lower-margin bitumen volumes and pricing pressure in Corsica, while Guyana and Jamaica weighed on Caribbean unit margins.

Importantly, margin momentum strengthened through the first half. Total R&M unit gross margin was broadly flat y-o-y in Q1 but increased c 13% in Q2. In Africa, Q2 unit gross margin rose c 44% despite volumes declining 1%. This suggests the H1 earnings improvement was increasingly margin-led as the period progressed.

Support & Services: Earnings broadly stable

Support & Services EBITDA was broadly stable at €111m compared with €114m in H125. Caribbean trading volumes increased 10%, supported by higher activity in the regional distribution business. African bitumen shipping activity declined as a greater proportion of volumes was handled internally.

Renewable electricity: Capacity growth, more selective investment

Photosol added 166MW during H126, taking operating capacity to 799MW, up 32% y-o-y, including the final tranches of the 200MW Creil project. Electricity production rose 28% to 343GWh, while power EBITDA reached c €25m versus €22m and reported EBITDA €15m versus €10m. The secured portfolio grew 22% to 1.5GW.

Solar capex fell 38% y-o-y to €57m following €190m of investment in FY25, primarily reflecting construction phasing rather than a reduction in H1 development activity. At end June, 135MW was under construction and a further 581MW was ready to build. Management expects H2 investment to increase vs H1, but also indicated that some capex previously envisaged through 2027 could be deployed over a longer period as Photosol adapts its investment pace to the political and regulatory environment. Rubis maintained its FY27 targets for consolidated EBITDA of €50–55m and power EBITDA of €80–85m. We therefore see scope for a more measured capital deployment profile while still preserving the FY27 earnings ambition.

Stronger outlook supports higher estimates and valuation

FY26 guidance raised, with H2 likely to normalise

Rubis increased FY26 EBITDA guidance to €775–825m from €740–790m. The new €800m midpoint implies H2 EBITDA of c €366m, down from €434m in H126 and broadly in line with the €371m achieved in H225 despite the stronger operating base entering the second half. We therefore view the revised range as allowing for a meaningful normalisation after H1, including the effect of elevated oil prices on demand, lower-margin European bitumen growth and continued pricing pressure in parts of the Caribbean. These headwinds should be partly offset by the more structural margin improvement in East Africa.

H1 strength feeds through to forecasts

Following the strong H1 results and higher guidance, we have raised our FY26 EBITDA forecast by 4.3% to €797m and our FY27 estimate by 4.8% to €848m. Our FY26 forecast is close to the midpoint of the revised guidance range and implies H2 EBITDA of €362m, modestly below H225.

Higher operating earnings drive a 9.7% increase in our FY26 EPS estimate to €3.38 and a 10.2% increase in our FY27 EPS estimate to €3.65. We have also revised the timing and pace of solar development and associated investment. Management's comments on project phasing support our lower near-term capex assumptions, with part of the programme potentially extending beyond 2027.

We have reduced our FY26 operating cash flow forecast to €535m following the larger H1 working capital outflow. Management indicated that H2 working capital could remain slightly negative at oil prices around US$100/bbl, be broadly flat around US$90/bbl and turn positive below this level. Our forecast assumes a partial H2 normalisation, although oil prices remain the main near-term sensitivity to cash conversion. We forecast net debt including leases of €1.54bn at end FY26, easing to €1.42bn in FY27 as working capital normalises and operating cash generation improves.

Valuation increases to €45.2/share

Our updated DCF valuation increases to €45.2/share from €42.0/share. Higher earnings forecasts and revised near-term capex assumptions more than offset an increase in our weighted average cost of capital (WACC) to 8.7% from 8.4%, reflecting the higher risk-free rate. We maintain our terminal growth assumption of 2.5%.

The stock trades at c 6.5x consensus forward EV/EBITDA, towards the lower end of its historical valuation range. In our view, investor attention has remained overly focused on M&A expectations and the scale of investment in solar, while H1 demonstrated continued volume growth and stronger unit profitability in Retail & Marketing. Our margin analysis points to a structural improvement in Africa despite pressure in Europe and the Caribbean, with the business continuing to perform strongly against elevated commodity prices and geopolitical uncertainty. With 30% upside to our revised DCF, we believe this strong operating performance, alongside a more measured approach to capital deployment in the solar business, is not fully reflected in the current share price.