E.ON continues consolidation
- Adjusted EBITDA of EUR6.6 billion down by 39 percent year on year, adjusted net income of EUR1.6 billion down by 64 percent
- System expansion of growth businesses: renewables, gas production, and power generation in Russia
- Full-year 2011 forecast confirmed: adjusted EBITDA expected to be between EUR9.1 and EUR9.8 billion, adjusted net income between EUR2.1 and EUR2.6 billion
- Planned target dividend for 2011 financial year remains at EUR1 per share
E.ON’s nine-month business performance was in line with its expectations. Nine-month sales were up by 21 percent year on year to roughly EUR78 billion, primarily because of an increase in external sales at its trading business. By contrast, E.ON’s adjusted EBITDA was down by 39 percent to about EUR6.6 billion. The decline had three main drivers. First, the early shutdown of nuclear power stations in Germany and Germany’s nuclear-fuel tax reduced earnings by EUR2.3 billion. Second, continued margin pressure reduced earnings in E.ON’s gas wholesale business by about EUR0.8 billion. Third, higher procurement costs in the retail business and the sale of Central Networks reduced earnings in the United Kingdom by about EUR0.5 billion.
E.ON’s renewables, upstream gas, and Russian power businesses again posted higher earnings. The Renewables unit grew its earnings by 19 percent to around EUR1.1 billion, primarily because of an increase in installed wind capacity. Earnings at E.ON’s upstream gas business rose by 22 percent to roughly EUR0.6 billion, mainly due to higher market prices. E.ON’s Russia unit grew its earnings by 39 percent to about EUR0.4 billion, owing primarily to an increase in generating capacity and an improved power margin.
E.ON’s nine-month adjusted net income of roughly EUR1.6 billion was 64 percent below the prior-year figure, mainly because of the decline in adjusted EBITDA. Amortization was at the prior-year level, and E.ON recorded a significant improvement in adjusted interest expense (net) due to the reduction in its net debt. E.ON’s nine-month investments in property, plant, and equipment, intangible assets, and shareholdings amounted to roughly EUR4.1 billion, about EUR1.4 billion below the prior-year figure.
At EUR4.5 billion, E.ON’s cash provided by operating activities of continuing operations was considerably below the prior-year figure of EUR9.2 billion. The main reasons for the decline were cash-effective items in conjunction with the decrease in adjusted EBITDA, a non-recurring adverse effect relating to the refunding of pension assets in the United Kingdom, and overall negative working-capital effects. The main negative factors for the latter item were lower subsidy payments for new wind farms in the United States due to a decrease in new capacity commissioned and changes in working capital at Trading and Gas.
The E.ON Group’s economic net debt stood at about EUR34.5 billion at September 30, 2011, its net financial position at about -EUR17 billion. Both are largely unchanged from the half-year figures but significantly improved from the prior-year figures. The main driver has been the resolute implementation of E.ON’s divestment program. Since November 2010, E.ON has divested businesses worth more than EUR9 billion.
The forecast for full-year 2011 is unchanged. E.ON expects its adjusted EBITDA to be between EUR9.1 and EUR9.8 billion and its adjusted net income to be between EUR2.1 and EUR2.6 billion. As a result, it also still plans to pay out a dividend of EUR1 per share for the 2011 financial year.
Systematic expansion of growth businesses
On the operating side, E.ON has achieved important milestones in the expansion of its growth businesses in recent months. In renewables, it has taken E.ON just two years to more than double its installed wind-power capacity in the United States to more than 2 gigawatts. E.ON is now one of the top five wind-power producers in the United States. By commissioning a combined-cycle gas turbine (CCGT) at Yaiva power station in Russia E.ON added another technologically advanced 400-megawatt unit to its generation portfolio in this fast-growing market, where it now has approximately 10.5 gigawatts of installed capacity. Ulrich Hartmann CCGT, commissioned at Irsching power station in Germany, sets new international standards for fuel-efficient, climate-friendly power generation. And a gas discovery in the U.K. North Sea represents another step in the successful development of E.ON’s growing upstream gas business.
Efficiency improvements on schedule
E.ON is on schedule with the implementation of its efficiency-enhancement program called E.ON 2.0. To ensure its ability to take strategic action over the medium and long term and to shield the company from the difficult-to-quantify risks of international economic and financial developments, E.ON is systematically enhancing its efficiency. By 2015 at the latest, E.ON intends to reduce its controllable costs from presently about EUR11 billion to EUR9.5 billion. It is currently working on detailed plans for specific initiatives, which include streamlining Group Management, reorganizing its business in Germany, and combining its gas and trading units in a single company. These plans will be presented to the E.ON AG Supervisory Board in December.
This press release may contain forward-looking statements based on current assumptions and forecasts made by E.ON Group management and other information currently available to E.ON. Various known and unknown risks, uncertainties and other factors could lead to material differences between the actual future results, financial situation, development or performance of the company and the estimates given here. E.ON AG does not intend, and does not assume any liability whatsoever, to update these forward-looking statements or to conform them to future events or developments.