## 1. Relevant industry

ITALGAS S.p.A. is primarily a gas distribution network utility. Based on the provided methodologies, the most relevant industry is **Regulated Utilities**.

Given Italgas’ regulated gas-distribution profile, the key credit metrics are best assessed using a regulated-utility approach. The provided data does not contain enough detail for all S&P analytical adjustments, so I estimate using reported financial statement items and clear cash-flow proxies.

---

## 2. Estimate 2021 Adjusted EBITDA

Reported/reconstructed EBITDA:

\[
\text{EBITDA} = \text{Operating profit} + \text{D\&A and impairment}
\]

2021:

- Profit from operating activities = €583.231m
- Depreciation, amortisation and impairment = €445.251m

\[
\text{Adjusted EBITDA}_{2021} = 583.231 + 445.251 = 1{,}028.482\text{m}
\]

No specific lease, pension, JV proportional EBITDA, or nonrecurring adjustments are quantified in the data, so no further adjustment is made.

**2021 Adjusted EBITDA ≈ €1,028.482m**

---

## 3. Estimate 2021 FFO

Baseline:

\[
\text{FFO} = \text{Adjusted EBITDA} - \text{cash interest} - \text{cash taxes}
\]

2021:

- Adjusted EBITDA = €1,028.482m
- Finance costs paid classified as operating activities = €59.783m
- Income taxes paid classified as operating activities = €206.923m

\[
\text{FFO}_{2021} = 1{,}028.482 - 59.783 - 206.923 = 761.776\text{m}
\]

**2021 FFO ≈ €761.776m**

---

## 4. Estimate 2021 Adjusted Debt

Use reported financial debt less eligible cash.

Reported debt at 2022-01-01, representing year-end 2021:

- Short-term financial liabilities excluding other current financial liabilities = €591.188m
- Other current financial liabilities = €0.290m
- Long-term financial liabilities excluding other noncurrent financial liabilities = €5,785.707m
- Other noncurrent financial liabilities = €6.283m

\[
\text{Reported debt}_{2021} = 591.188 + 0.290 + 5{,}785.707 + 6.283 = 6{,}383.468\text{m}
\]

Eligible cash:

- Cash and cash equivalents = €1,391.763m
- Current financial assets excluding other current financial assets = €5.120m

\[
\text{Eligible cash}_{2021} = 1{,}391.763 + 5.120 = 1{,}396.883\text{m}
\]

\[
\text{Adjusted Debt}_{2021} = 6{,}383.468 - 1{,}396.883 = 4{,}986.585\text{m}
\]

**2021 Adjusted Debt ≈ €4,986.585m**

---

## 5. 2021 Adjusted Debt / Adjusted EBITDA

\[
\frac{\text{Adjusted Debt}}{\text{Adjusted EBITDA}} =
\frac{4{,}986.585}{1{,}028.482} = 4.85x
\]

**2021 Adjusted Debt / EBITDA ≈ 4.85x**

---

## 6. 2021 FFO / Adjusted Debt

\[
\frac{\text{FFO}}{\text{Adjusted Debt}} =
\frac{761.776}{4{,}986.585} = 0.153
\]

**2021 FFO / Adjusted Debt ≈ 15.3%**

---

## 7. Estimate 2022 Adjusted EBITDA

2022:

- Profit from operating activities = €641.338m
- Depreciation, amortisation and impairment = €479.186m

\[
\text{Adjusted EBITDA}_{2022} = 641.338 + 479.186 = 1{,}120.524\text{m}
\]

No further quantified S&P adjustments are available.

**2022 Adjusted EBITDA ≈ €1,120.524m**

---

## 8. Estimate 2022 FFO

2022:

- Adjusted EBITDA = €1,120.524m
- Finance costs paid classified as operating activities = €53.720m
- Income taxes paid classified as operating activities = €152.372m

\[
\text{FFO}_{2022} = 1{,}120.524 - 53.720 - 152.372 = 914.432\text{m}
\]

**2022 FFO ≈ €914.432m**

---

## 9. Estimate 2022 Adjusted Debt

Reported debt at 2023-01-01, representing year-end 2022:

- Short-term financial liabilities excluding other current financial liabilities = €142.437m
- Other current financial liabilities = €0.290m
- Long-term financial liabilities excluding other noncurrent financial liabilities = €6,402.913m
- Other noncurrent financial liabilities = €0.034m

\[
\text{Reported debt}_{2022} = 142.437 + 0.290 + 6{,}402.913 + 0.034 = 6{,}545.674\text{m}
\]

Eligible cash:

- Cash and cash equivalents = €451.946m
- Current financial assets excluding other current financial assets = €5.770m
- Other current financial assets = €17.455m

\[
\text{Eligible cash}_{2022} = 451.946 + 5.770 + 17.455 = 475.171\text{m}
\]

\[
\text{Adjusted Debt}_{2022} = 6{,}545.674 - 475.171 = 6{,}070.503\text{m}
\]

**2022 Adjusted Debt ≈ €6,070.503m**

---

## 10. 2022 Adjusted Debt / Adjusted EBITDA

\[
\frac{\text{Adjusted Debt}}{\text{Adjusted EBITDA}} =
\frac{6{,}070.503}{1{,}120.524} = 5.42x
\]

**2022 Adjusted Debt / EBITDA ≈ 5.42x**

---

## 11. 2022 FFO / Adjusted Debt

\[
\frac{\text{FFO}}{\text{Adjusted Debt}} =
\frac{914.432}{6{,}070.503} = 0.151
\]

**2022 FFO / Adjusted Debt ≈ 15.1%**

---

## 12. Credit trend classification

### Signal 1: Leverage

\[
\Delta \text{Debt/EBITDA} = 5.42x - 4.85x = +0.57x
\]

Thresholds:

- ≤ -0.2x = Improving
- between -0.2x and +0.2x = Stable
- ≥ +0.2x = Deteriorating

The leverage ratio increased by about **0.57x**, which is clearly above the +0.2x deterioration threshold.

**Signal 1 = Deteriorating**

### Signal 2: Cash-flow coverage

\[
\Delta \text{FFO/Debt} = 0.151 - 0.153 = -0.002
\]

This is a decline of about **0.2 percentage points**, well within the ±3 percentage-point stable band.

**Signal 2 = Stable**

### Combined conclusion

One signal is **Deteriorating** and the other is **Stable**, so the rule says to return the non-Stable category.

Although EBITDA and FFO improved in 2022, adjusted debt increased materially, mainly because cash declined sharply and financial debt increased. This caused leverage to worsen meaningfully, while FFO/debt was broadly flat. Therefore, the overall year-on-year credit trend is best classified as **Deteriorating**.

<answer>Deteriorating</answer>