E.ON increases first-half earnings and affirms forecast
- Forecast for 2018 adjusted EBIT and adjusted net income affirmed
- First-half adjusted EBIT 10 percent above prior-year figure, adjusted net income up 19 percent
- Economic net debt reduced further
- Important milestones reached in transaction with RWE
E.ON delivered good results for the first half of 2018. Adjusted EBIT in the company’s core business of €1.7 billion was 10 percent above the weak prior-year figure (€1.6 billion). Adjusted EBIT for the E.ON Group as a whole likewise rose by 10 percent to €1.9 billion (prior year: €1.8 billion). Adjusted net income of €1,052 million surpassed the prior-year figure of €881 million by €171 million, or 19 percent.
Forecast for 2018 financial year affirmed
At the presentation of E.ON’s Interim Report for the first half of 2018 in Essen, E.ON CFO Marc Spieker affirmed the company’s forecast for the 2018 financial year: “Our core business — Energy Networks, Customer Solutions, and Renewables — delivered good results, even though we continue to face fierce competition, primarily in our customer solutions business. We’re meeting these challenges with new products, new solutions, and even better, more efficient processes, particularly for our customers. All the key figures and developments for the entire Group are in line with our plan, and we therefore affirm our forecast for full-year 2018.”
E.ON continues to expect the Group’s full-year adjusted EBIT to be between €2.8 and €3 billion and its full-year adjusted net income to be between €1.3 and €1.5 billion.
Good performance in core business
The Customer Solutions segment in particular contributed to E.ON’s good first-half earnings performance. E.ON enlarged its customer base relative to the prior year by approximately 100,000 household customers. Customer Solutions’ sales of €11.5 billion were slightly above the prior-year figure of €11.2 billion. Its adjusted EBIT rose by 8 percent year on year, from €440 million to €477 million.
The Energy Networks segment again generated more than half of the E.ON Group’s earnings. Its sales of €6.1 billion were 30 percent below the prior-year level of €8.6 billion. This is only attributable to a technical effect resulting from the application of a new International Financial Reporting Standard. Starting this financial year, renewables subsidies and other levies that are passed through are netted out in the income statement, which reduces both sales and costs of materials. Earnings from operations remain unaffected. Energy Networks’ adjusted EBIT of €1,070 million was roughly at the prior-year level of €1,087 million. A special item in the low double-digit million range partially offset an anticipated decline in earnings due to regulatory reasons. However, E.ON expects this segment’s earnings to decline somewhat more significantly as the year goes forward. This has already been factored into the company’s forecast for full-year 2018.
Sales at the Renewables segment rose from €710 million to €741 million, primarily because of higher output due to the commissioning of new offshore and onshore wind farms. This segment’s earnings increased by 15 percent, from €205 million to €236 million.
Earnings at Non-Core Business, which consists of PreussenElektra and the generation business in Turkey, totaled €224 million, 9 percent above the prior-year figure of €205 million.
Good operating results yield strong cash flow
E.ON’s operating cash flow of €1.4 billion was €3.5 billion lower than in the prior-year period, mainly because of an exceptionally significant one-off item, the roughly €2.85 billion refund of the nuclear-fuel tax the company received in June 2017.
Debt reduced further
Compared with the figure at year-end 2017 (€19.2 billion), E.ON reduced its economic net debt by €3.4 billion, or 18 percent, to roughly €15.9 billion. This positive development is principally attributable to the proceeds from the sale of the company’s Uniper stake and gas network in Hamburg. “We’ll use this balance-sheet flexibility to implement the transaction we agreed on with RWE in March. When it closes, it will create a new E.ON and an even more powerful company, a company focusing on smart grids and innovative customer solutions and fully dedicated to serving its customers,” Spieker said.
Important milestones reached in transaction with RWE
Since announcing the transaction with RWE in March 2018, E.ON has already reached important milestones toward implementation. Together with RWE and innogy and in consultation with the Group Works Councils, in May E.ON reached a collective-bargaining Agreement in Principle with ver.di and IGBCE. This was followed in July by a Framework Agreement with the E.ON SE Works Council and Group Works Council. Both agreements establish reliability for all employees on the road toward the new E.ON. In July E.ON also reached an agreement with innogy to work together constructively, to the degree permitted by law, in preparing for the integration. In late July E.ON successfully completed its voluntary public takeover offer to innogy’s minority shareholders. Through the end of the extended offer period, about 9.4 percent of innogy stock was tendered to E.ON. Together with the 76.8-percent stake from RWE, this equals 86.2 percent of innogy's share capital. “The agreed-on acquisition of RWE’s majority stake alone would’ve enabled us to integrate innogy into E.ON,” Spieker said. “We’re therefore very satisfied with the outcome of our voluntary public takeover offer and are pleased that many other innogy shareholders accepted our offer. Numerous options are available to us for the legal aspects of the integration after closing. We’re now focusing on the preparations for this integration and a swift antitrust approvals process.”