E.ON increases nine-month earnings and narrows forecast range
- Full-year 2018 adjusted EBIT and adjusted net income now expected to be in upper half of forecast range
- Nine-month adjusted EBIT 11 percent above prior-year figure, adjusted net income up 25 percent
- Economic net debt reduced significantly
- First decisions made regarding planned integration of innogy
At the nine-month mark Essen-based energy company E.ON remains on course operationally, financially, and strategically. Adjusted EBIT of roughly €2.4 billion was 11 percent above last year’s number (€2.1 billion), due in part to seasonal factors. Adjusted net income of €1.2 billion surpassed the prior-year figure of around €1.0 billion by 25 percent.
Forecast for 2018 financial year affirmed
At the presentation of E.ON’s Quarterly Statement, E.ON CFO Marc Spieker affirmed the company’s forecast for the 2018 financial year: “After three quarters our earnings were again higher. All the key figures and developments—primarily at our core businesses—Energy Networks, Customer Solutions, and Renewables—are fully 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 billion and €3.0 billion and its full-year adjusted net income to be between €1.3 billion and €1.5 billion. E.ON now anticipates that both earnings metrics will be in the upper half of their respective forecast range.
Earnings benefit from special items
The Energy Networks segment’s sales of €9.1 billion were 29 percent below the prior-year figure of €12.9 billion. The primary factor in the decline was 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 company’s income statement, which reduces both sales and costs of materials. This has no effect on operating earnings. This segment’s adjusted EBIT of €1,472 million was roughly at the prior-year level of €1,503 million. Special items at E.ON’s network business in Germany partially offset an anticipated decline in earnings due to regulatory factors. Adjusted EBIT in Sweden benefited from an improved gross margin in the power business, which resulted from tariff increases. This was partially offset by adverse currency-translation effects.
Customer Solutions’ sales of €15.8 billion were 2 percent above the prior-year figure of €15.5 billion. Its adjusted EBIT rose by 5 percent year on year, from €342 million to €360 million. A particularly significant contribution came from E.ON’s customer solutions business in the German market. Earnings in the United Kingdom were at the prior-year level. However, nine-month earnings there benefited from a change in how costs are recorded.
Sales at the Renewables segment rose by 7 percent, from €1.1 billion to €1.2 billion, primarily because of higher output due to the commissioning of new onshore and offshore wind farms. This segment’s adjusted EBIT increased by 14 percent, from €248 million to €283 million.
Earnings at Non-Core Business, which consists of PreussenElektra and the generation business in Turkey, totaled €314 million, 19 percent above the prior-year figure of €264 million. The increase is primarily attributable to improved earnings at the generation business in Turkey. Prior-year equity earnings on E.ON’s stake in Enerjisa Üretim were adversely affected in particular by a book loss on the sale of a hydroelectric station.
Adjusted EBIT reported under Corporate Functions/Other improved significantly year on year, owing in part to lower costs for personnel and materials as a result of the company’s Phoenix reorganization program.
Strong EBIT yields strong cash flow
Operating cash flow of €3.5 billion was €6.6 billion above the prior-year level. The main reason for the increase is that in July 2017 E.ON paid €10.3 billion into Germany’s public fund to finance nuclear-waste disposal. This amount was partially offset, among other items, by the roughly €2.85 billion nuclear-fuel-tax refund 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 €3.9 billion, or 20 percent, to roughly €15.4 billion. This positive development is principally attributable to the proceeds from the sale of the company’s Uniper stake.
Further milestones reached in planned takeover of innogy
Last week E.ON und innogy made the first major decisions regarding the planned integration of innogy. These decisions are to be implemented after the closure of the transaction, which is subject to the approval of the relevant regulatory agencies. After this, the new company will retain the name E.ON. A detailed brand architecture is being prepared. E.ON’s and innogy’s distribution system operators (DSOs) in Germany will retain their structure. Westnetz, a DSO in west-central Germany that is now is part of innogy, will be set up as a separate company analogous to E.ON’s DSOs and thus strengthened. As currently, the new E.ON’s corporate headquarters will focus on key management tasks so that the operating units have as much room for maneuver as possible and are even closer to customers.
“These decisions will help ensure that the new E.ON is customer-oriented and can make an important contribution to the success of the energy transition and to climate protection in Europe,” Marc Spieker said. “For this purpose, we want to further enhance our innovativeness as well. We therefore intend to establish an innovation team at corporate headquarters that works across our product ranges and markets and that can further improve our competitive position.”
In addition, E.ON and innogy agreed that the previously identified €600 to €800 million in synergies from 2022 forward can be leveraged. All planned integrations will be carried out in a socially responsible manner, in keeping with the strong tradition of the companies involved. For this reason, in May innogy, E.ON, and RWE, in consultation with their Group Works Councils, reached an Agreement in Principle on Collective Bargaining for Germany with the unions ver.di and IGBCE.