E.ON is building on new customer solutions and affirms 2017 forecast
- First-quarter adjusted EBIT and adjusted net income below prior-year level, as anticipated
- Earnings forecast for 2017 affirmed
- Operative cash flow considerably higher
- Debt reduced, equity significantly strengthened
E.ON’s performance in the first quarter of the 2017 financial year was in line with expectations. The Essen-based energy company generated sales of €10.5 billion, adjusted EBIT of just over €1 billion, and adjusted net income of about €0.5 billion. As anticipated, these numbers are below the company’s prior-year earnings but in line with its forecast for full-year 2017.
At the presentation of E.ON’s interim results, CFO Marc Spieker unequivocally affirmed the company’s 2017 forecast: “After the completion of the first quarter we affirm our forecast for 2017. Our first-quarter operating performance was in line with our expectations despite a difficult business environment. We significantly improved our capital structure. Our strong cash flow and the successful capital increase we conducted in March enabled us to reduce our net debt by €1.6 billion.”
E.ON’s first-quarter sales declined by about 7 percent year on year to about €10.5 billion. Energy Networks’ sales of roughly €4.2 billion were at the prior-year level. Sales at Customer Solutions declined by around €500 million to roughly €6.5 billion owing to currency-translation effects and lower sales volume in the United Kingdom. Renewables’ sales decreased slightly to around €380 million because less favorable conditions relative to the prior year reduced the utilization of wind farms.
The E.ON Group’s first-quarter adjusted EBIT of just over €1 billion was around 34 percent below the prior-year figure. The decline was in line with E.ON’s expectations. In E.ON’s core business, the Energy Networks segment performed very well, increasing its adjusted EBIT by 11 percent to roughly €630 million. Renewables generated adjusted EBIT of €160 million, which was at the prior-year level. The decline in the E.ON Group’s adjusted EBIT was primarily caused by adverse developments in Customer Solutions and at PreussenElektra. Customer Solutions’ earnings were lower primarily because higher grid fee and higher procurement costs for power and gas in Germany and the United Kingdom. In the Non-Core Business segment, PreussenElektra’s Brokdorf power station was offline longer than anticipated after an overhaul. These factors had an adverse impact on first-quarter earnings but will be fully offset during the course of the year. Consequently, E.ON’s earnings forecast remains unchanged.
E.ON is building on a strong core business and especially new solutions for customers. “We’re intensifying our marketing and sales activities in all of our markets,” Spieker said. “New high-margin products and services are strengthening the new E.ON’s earnings profile in lasting way. We offer industrial and commercial customers a broad spectrum of innovative energy solutions, in particular for distributed generation, energy efficiency, and energy management. On the residential customer side, we’ve launched a very successful solar campaign that includes a battery storage system, the SolarCloud, and, just in the last few days, an innovative web tool called Google Sunroof.”
E.ON’s first-quarter adjusted net income declined by about 20 percent year on year to roughly €525 million (adjusted net income is after interest and taxes and adjusted to exclude non-operating items). As anticipated, the decline in adjusted EBIT was partially offset by an improvement in interest income and a reduction in tax expense.
Cash provided by operating activities of continuing operations of just under €900 million was about €300 million above the prior-year figure. First-quarter investments of around €600 million were at the prior-year level.
E.ON successfully reduced its debt and strengthened its equity in the first quarter. Its debt declined from €26.3 billion at year-end 2016 to €24.7 billion at the end of the first quarter. The improvement is attributable to E.ON’s first-quarter earnings and, in particular, to the capital increase it conducted in March. The demand for the new stock was strong, and the roughly €1.35 billion in proceeds was a good result.