3rd UPDATE: RWE 1Q Net Profit Above Expectations,Backs 09 Goals
14 Mai 2009 - 2:23PM
Dow Jones News
German utility RWE AG (RWE.XE), which is targeting Dutch peer
Essent NV in a EUR9.3 billion takeover offer, Thursday reported
above-expectations first-quarter results and reiterated it expects
stable earnings in 2009.
RWE said it still expects earnings before interest, taxes,
depreciation and amortization as well as operating profit to come
in at the 2008 levels.
Recurrent net profit in 2009 is also expected to match the
EUR3.37 billion achieved last year, Essen-based RWE said.
In the company's first-quarter report RWE Chief Executive
Juergen Grossmann conceded the economic crisis has reached the
utility sector as power demand showed "record declines of 5% and
4%" in the German and U.K. markets.
Still, analysts said RWE appears to be faring better than its
main domestic rival E.ON AG (EOAN.XE), which sounded more cautious
when it reported first-quarter results Wednesday.
E.ON had said its 2009 earnings guidance is subject to
significantly more uncertainty than in previous years as it is
difficult to predict the further economic development.
RWE is sounding more optimistic than E.ON with related to its
more narrow regional focus, said UniCredit analyst Karin Brinkmann,
who rates RWE as hold.
E.ON in recent years entered many markets in southern and
eastern Europe that RWE isn't active in.
"But in the economic crisis that expansion has had several
negative repercussions on E.ON's business in terms of currency
depreciation and the sharp drop in demand from industrial
customers," Brinkmann said.
RWE, though, isn't feeling the impact of lower industrial power
and gas demand in southern Europe because it isn't active in those
markets and also has less exposure to currency depreciation than
E.ON, because it is active in fewer non-euro markets, Brinkmann
added.
RWE Thursday also reported first-quarter net profit more than
doubled to EUR1.75 billion from EUR809 million a year earlier,
exceeding the EUR1.37 billion forecast by 16 analysts polled by Dow
Jones Newswires.
Recurrent net profit adjusted for non-recurring items, such as
last year's impairment charge of more than EUR600 million related
to the initial public offering of its U.S.-based water unit
American Water Works Co (AWK), came in at EUR1.51 billion from
EUR1.42 billion a year earlier, exceeding the EUR1.44 billion
forecast by 16 analysts polled by Dow Jones Newswires.
Operating profit rose 4.8% to EUR2.62 billion from EUR2.5
billion. Analysts had forecast EUR2.55 billion.
RWE said operating earnings were driven by exceptionally high
profit contributions from its trading business and gas midstream
activities of RWE Supply & Trading.
RWE warned, however, the strong performance of the trading
business "cannot be extrapolated for the full year".
Analysts said the results demonstrate RWE is currently faring
better through the economic crisis than competitor E.ON which
reported a 5% fall in operating profit Wednesday.
Still, RWE's result aren't quite as good as they look at first
glance, said WestLB analyst Peter Wirtz, who rates RWE as
neutral.
Wirtz said the power generation business performed slightly
worse than expected due to lower electricity sales volumes
reflecting weak demand in the recession.
He added that the RWE Supply & Trading result was boosted by
the absence of a non-recurring effect related to the revaluation of
gas derivatives used to hedge supply agreements. The revaluation
reduced last year's first quarter result by around EUR110
million.
Despite a drop in electricity and gas sales volumes RWE posted a
first-quarter revenue increase of more than 8% to EUR14.52 billion,
above analysts forecast of EUR13.69 billion. The company said the
rise in revenue was driven mainly by higher realized prices for
power and gas.
RWE's shares have lost around 25% in value over the past 12
months, outperforming its Dow Jones Euro Stoxx Utilities peer
group.
At 1133 GMT RWE traded lower EUR0.37 or 0.6% at EUR58.08 in line
with an overall softer market.
Company Web site: www.rwe.com
-By Jan Hromadko, Dow Jones Newswires; +49 69 29 725 503;
jan.hromadko@dowjones.com