Germany: E.ON Net Income Climbs

E.ON AG has made a successful start to 2012. The Düsseldorf-based energy company put in a positive first-quarter performance, increasing its EBITDA by 9 percent year on year to around €3.8 billion and its underlying net income by 27 percent to around €1.7 billion.

“As we described in March, we’re now past the worst. Our first-quarter results confirmed this trend. We’re making good progress. But we still need to be resolute about meeting our current challenges and implementing the changes we’ve initiated,” said CFO Marcus Schenck as he presented E.ON’s first-quarter results.

E.ON’s sales rose by 28 percent year on year to €35.7 billion, owing in particular to higher sales in the Optimization & Trading segment. This was primarily the result of an increase in trading activity to optimize E.ON’s generation fleet. The Renewables, Germany, and Russia segments also posted higher sales. Sales were significantly lower in the Generation segment due to the absence of output from nuclear power stations in Germany that were mandatorily shut down in 2011.

In detail, E.ON grew its EBITDA by 9 percent year on year to around €3.8 billion, mainly because:

• earnings at its Optimization & Trading activities were roughly €400 million above the prior-year figure, due in particular to earnings improvements totaling about €340 million resulting from the successful renegotiation of a significant percentage of the company’s long-term gas procurement contracts
• earnings in Russia were up by 30 percent to around €200 million, due chiefly to an increase in installed generating capacity relative to the prior-year period
• on the adverse side, lower prices in Europe power generation markets and the absence of output from nuclear power stations in Germany that were mandatorily shut down in 2011 reduced E.ON’s first-quarter earnings by a total of about €250 million.

E.ON’s underlying net income rose by 27 percent to about €1.7 billion, mainly because of the increase in EBITDA. A lower tax expense was another positive factor. Amortization and economic interest expense were at the prior-year level.

E.ON’s first-quarter investments in property, plant, and equipment, intangible assets, and shareholdings totaled €1.2 billion, roughly the same as the prior-year figure.

Operating cash flow declined by 51 percent year on year to roughly €450 million. Positive effects from the EBITDA increase and a decline in working capital were more than offset by significant withholding taxes which E.ON expects to be refunded in the second half of the year.

E.ON’s economic net debt stood at €37.6 billion at the end of the first quarter, about €1.2 billion more than at year-end 2011. Higher provisions for pensions, relating primarily to a decline in the discount rate in Germany, were the main factor. Another factor was the decline in our first-quarter operating cash flow.

On the basis of its current business portfolio, E.ON continues to anticipate that its full-year 2012 EBITDA will be between €9.6 and €10.2 billion and its underlying net income between €2.3 and €2.7 billion. E.ON continues to plan to pay a dividend of €1.10 per share for the 2012 financial year. It also reaffirmed its forecast for 2013. E.ON expects EBITDA of €11.6 to €12.3 billion and underlying net income of €3.2 to €3.7 billion. It continues to plan to pay a dividend of at least €1.10 per share for the 2013 financial year.

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LNG World News Staff, May 9, 2012