E.ON off to strong start in new financial year
- Forecast for 2018 adjusted EBIT and adjusted net income affirmed
- First-quarter adjusted EBIT and adjusted net income up significantly year on year
- Voluntary public takeover offer made for all innogy SE stock
E.ON delivered a strong first quarter of 2018. Adjusted EBIT rose by 24 percent, from €1 billion in the prior year to €1.3 billion. Adjusted net income of €727 million surpassed the weak prior-year figure of €525 million by 38 percent.
Forecast for 2018 financial year affirmed
At the presentation of E.ON’s quarterly statement for the first quarter of 2018 in Essen, E.ON CFO Marc Spieker affirmed the company’s forecast for the 2018 financial year: “The first quarter seamlessly continued our positive performance of last year. Our operating business is strong. We achieved significant growth by adding more than 50,000 customers in Germany. This is a fine achievement by the colleagues at our sales business and demonstrates that customers trust us. 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 at customer business in Germany
The Customer Solutions segment in particular contributed to E.ON’s very good first-quarter earnings performance. Its sales of €6.7 billion were slightly above the prior-year figure of €6.5 billion. But its adjusted EBIT surpassed the very weak prior-year figure by 23 percent, increasing from €319 million to €392 million. A particularly significant contribution came from the customer solutions business in the German market.
The Energy Networks segment again generated more than half of E.ON’s earnings. In the first three months of this year, however, its earnings were affected by the disposal of Hamburg Netz GmbH and by anticipated regulatory items. Its adjusted EBIT of €642 million was about 5 percent below the prior-year figure.
The Renewables segment’s earnings reflected two countervailing effects. On the one hand, its installed capacity was higher than in the prior-year period due to the addition of new wind farms. On the other, the sales prices for its power output declined. On balance, however, its earnings rose by about 7 percent to €171 million.
Earnings at Non-Core Business, which consists primarily of PreussenElektra, returned to normal. The prior-year figure was adversely affected by unplanned outages and an extended overhaul at Brokdorf nuclear power station. Consequently, this segment’s first-quarter earnings rose from -€24 million last year to €109 million.
Cash flow weaker due to seasonal factors
At €0.1 billion, E.ON’s operating cash flow from continuing operations was €0.7 billion lower than in the prior-year period, which benefited from nonrecurring items. It reflects a seasonal delay that is typical for a first quarter in the energy business. The supply costs in the energy sales are significantly higher in the winter, whereas customers’ payments are distributed evenly over the year. This effect will resolve itself as the year moves forward.
Debt to decline further as year moves forward
The seasonal decline in E.ON’s operating cash flow caused its economic net debt to increase slightly relative to year-end 2017. By the end of the year, however, it will decrease substantially from its current level of €19.7 billion owing to the planned sale of E.ON’s Uniper stake and the planned transfer of its Nord Stream 1 stake into a pension CTA. “E.ON’s debt-reduction program is right on course,” Spieker said.
Uniper disposal on schedule
The positive decision made on April 28, 2018, by the Russian Government Commission on Monitoring Foreign Investment fulfilled another important precondition for Fortum to acquire E.ON’s 46.65-percent stake in Uniper. E.ON is confident that the European Commission and Russia’s antitrust agency will issue their approvals in the months ahead so that E.ON and Fortum can complete the transaction as planned.
Voluntary public takeover offer for innogy stock
After concluding an asset-swap agreement with RWE in March, on April 27, 2018, E.ON made a voluntary public takeover offer for innogy stock. The offer gives innogy shareholders the opportunity to obtain a considerable premium relative to the price of innogy stock on February 22, before it was influenced by speculation about a takeover and to already assure themselves of a €1.64 dividend for the current financial year.