11/11/2009
E.ON earnings stable despite economic crisis
Currency effects push adjusted EBIT just below prior-year figure
2009 full-year adjusted EBIT forecast unchanged at high prior-year level
Decline in full-year adjusted net income now expected to be 3 to 5 percent
Düsseldorf-based energy company E.ON again posted stable results despite the continuing economic crisis, confirmed its forecast for full-year adjusted EBIT, and raised slightly its forecast for full-year adjusted net income. E.ON’s results were again only just below the solid prior-year level, with nine-month adjusted EBIT of EUR7.7 billion down EUR45 million, even though the company’s power and gas businesses continued to experience slight declines in sales volume. Without the currency-translation effects that reduced E.ON’s earnings from the United Kingdom and Sweden in euros, E.ON’s adjusted EBIT actually would have surpassed the prior-year figure, demonstrating that E.ON has further improved its operating business. The main drivers were the company’s foresighted hedging strategy, the successes it has achieved in its ongoing efficiency-enhancement program called PerformtoWin, and the first earnings effects from its growth investments of the past two years.
E.ON’s sales were down slightly, declining by 2 percent to EUR59.9 billion. The key factors were lower gas sales volume and lower sales prices for oil and gas at the Pan-European Gas market unit, negative currency-translation effects, and lower nuclear and hydro production at the Nordic market unit.
The Central Europe market unit’s adjusted EBIT rose by about 1 percent to EUR3.7 billion. The adverse impact of the economic crisis, outages at nuclear power stations, the absence of earnings resulting from the sale of generation capacity, and a narrowing of retail electricity margins were more than offset by the addition of operations in France and Romania, higher network charges, and efficiency enhancements. By contrast, Pan-European Gas’s adjusted EBIT fell by 33 percent to EUR1.4 billion. The main factors were a recession-driven decline in sales volume along with lower transport charges and narrower margins in the gas-trading business.
At EUR375 million, the U.K. market unit’s adjusted EBIT was also down significantly. This was predominantly due to the transfer of activities to the Energy Trading market unit; other factors were sterling’s weakness against the euro and narrower margins in power generation. Nordic’s adjusted EBIT declined to EUR403 million due to planned outages at nuclear power stations, lower power production and sales volumes resulting from the sale of generation capacity to Statkraft, and the weak Swedish kroner. The U.S. Midwest market unit increased adjusted EBIT by 4 percent to EUR318 million, benefiting from favorable currency-translation effects and wider margins in its regulated retail business.
The Energy Trading market unit posted a particularly significant earnings increase, contributing EUR803 million in adjusted EBIT. Of this, the biggest share—EUR703 million—came from the optimization business, particularly from the marketing of E.ON’s power production. Together, the operations in E.ON’s New Markets segment (Russia, Italy, Spain, and Climate & Renewables) delivered EUR732 million in adjusted EBIT.
E.ON’s adjusted net income, which does not include effects like net book gains and the marking to market of derivatives, was EUR4.5 billion, roughly on par with the prior-year figure. E.ON’s cash provided by operating activities declined by 13 percent year on year to about EUR7.1 billion.
E.ON expects its full-year 2009 adjusted EBIT to match the high prior-year level and now expects the decline in full-year adjusted net income to be around 3 to 5 percent. E.ON’s previous forecast was for a decline of 5 to 10 percent.