E.ON increases future dividend payout ratio
- Balance sheet substantially strengthened at half-year mark, debt reduced faster than planned
- E.ON increases payout ratio to at least 65 percent and strives for dividend policy in line with peers and absolute dividend growth
- Possible flexibility for growth investments
- Earnings forecast for full-year 2017 reaffirmed
- Adjusted net income substantially above prior-year figure
- Adjusted EBIT recovers tangibly from first quarter
- Investments and new products to create added value for customers and opportunities for a successful energy transition
E.ON concluded the first half of 2017 with a significantly stronger balance sheet. The Essen-based energy company achieved strong earnings growth in its core business and substantially reduced its debt. “In the first half of 2017 we continued to move forward in successfully implementing E.ON’s new strategy. We strengthened our balance sheet and reduced our debt faster than planned. By continuing to systematically implement our debt-reduction program, we’ll be well on our way toward achieving the flexibility to increase our dividend. At the same time, we want to invest in sustainable growth and thus to expand our leading position in the new energy world. This will make E.ON an even more attractive investment. Our targeted investments and numerous new products will help give our customers more value and opportunities in a more successful energy transition.” With these words E.ON CEO Johannes Teyssen announced the new E.ON’s entry into the next phase of its development. Just last year E.ON spun off its conventional energy business and since then has focused entirely on its new core business segments: Energy Networks, Customer Solutions, and Renewables.
E.ON’s substantially strengthened balance sheet and planned additional debt reduction will give it the flexibility to increase the dividend payout to shareholders and also to invest in sustainable growth. Beginning with the dividend for the financial year 2018, E.ON aims to raise its payout ratio from the current 50 to 60 percent to a minimum of 65 percent. Yesterday the Supervisory Board approved the Management Board’s proposal for the increase. The company will specify the exact range at the release of its 2017 results. E.ON is striving for a payout ratio in line with its relevant peers and also for absolute dividend growth.
In addition, E.ON will use its possible financial flexibility for investments in sustainable growth. Teyssen announced that the company will present an updated growth and investment strategy with the release of its 2017 results. “We’ll focus on our strong customer base and its interests. We offer our customers more efficient networks, new energy solutions, and competitive renewables. Our sustainable business models will deliver increasing earnings, which will benefit our investors as well.”
E.ON expressly reaffirms its forecast for full-year 2017. “We announced that we would play a strong catch-up game to make up for the slow start in the first quarter,” E.ON CFO Marc Spieker said. “We already largely achieved this in the second quarter. Our core business delivered strong earnings growth of 25 percent in the second quarter. This performance puts us on course for our forecast for full-year 2017, which we reaffirm today: we plan to post adjusted EBIT of €2.8 to €3.1 billion and adjusted net income of €1.2 to €1.45 billion.”
E.ON recorded first-half sales of €19.6 billion, adjusted EBIT of €1.8 billion, and adjusted net income of €881 million. As anticipated, adjusted EBIT was below the prior-year figure due to the company’s extraordinarily weak first quarter.
E.ON’s network business in particular delivered a good performance in all regions. Second-quarter adjusted EBIT of the Energy Networks segment increased by 31 percent year on year to €396 million. The main factors were improved margins in Sweden and the Czech Republic along with regulatory effects in Germany. This segment’s first-half earnings of more than €1 billion were 18 percent above the prior-year figure.
E.ON’s sales business stabilized in the second quarter. Its first-quarter earnings were adversely affected by sharply higher grid fees charged by Germany’s transmission system operators that E.ON could not begin passing through to customers until May.
First-half adjusted EBIT at the Renewables segment declined by about €50 million. Although wind conditions improved, E.ON did not, as in the prior-year period, sell stakes in wind farms. As a result, it recorded no book gains.
E.ON’s first-half adjusted net income of €881 million was in line with expectations and substantially above the prior-year figure. As anticipated, the decline in adjusted EBIT was offset by a reduction in the company’ interest and tax expense.
Operating cash flow of €4.9 billion was substantially—€3.2 billion—above the prior-year figure. The increase resulted primarily from the roughly €2.85 billion refund of nuclear-fuel taxes E.ON received in June 2017 and from strong cash flow generated by its core business.
E.ON reduced its economic net debt substantially, from €26.3 billion at year-end 2016 to €21.5 billion at June 30, 2017. Alongside the company’s solid operating cash flow, the main factors were a roughly €1.35 billion capital increase and the refund of the nuclear-fuel tax.
Teyssen also provided an overview of current developments in E.ON’s core businesses:
- E.ON is actively responding to the growing need to expand and modernize its networks as key infrastructure for a successful energy transition. It is systematically realizing the growing potential of grid digitalization as well. Preventive-maintenance software and digital staff-planning systems are making E.ON’s network companies more efficient. This helps its network customers, increases reliability, reduces costs, and enhances regional networks’ role as the backbone of the energy transition.
- E.ON offers residential and business customers complete e-mobility solutions. At eon-drive.de, customers can order a wall-mounted charge point, a green-power tariff, and a flat rate for charging their electric vehicle. E.ON customers in Germany can recharge their vehicle at just over 4,000 charging stations nationwide, which they can access with an E.ON app or a chip card.
- E.ON has launched new products for residential customers, such as the Aura storage system for solar power, E.ON SolarCloud (which is so far unique in the marketplace), and, as part of an exclusive partnership with Google, Sunroof. The demand for E.ON solar solutions in Germany has increased sixfold in one year.
- E.ON is also making use of new sales channels. In early July the company began offering an affordably priced green power product with a price cap until 2019 through Lidl, a nationwide discount retailer in Germany.
- E.ON has also achieved substantial growth in its B2B business, whose order volume has increased dramatically. In 2017 E.ON expects this business to double relative to 2016 to roughly €1 billion.
- Important projects at E.ON’s renewables business entered service, such as Iron Horse energy storage system in the United States. The construction of Arkona wind farm in the Baltic Sea is on schedule, as are E.ON’s other new-build projects, primarily onshore wind farms in the United States.