E.ON reaffirms 2019 forecast after solid operating performance in first quarter
- As anticipated, first-quarter adjusted EBIT and adjusted net income below strong prior-year figures
- Forecast for adjusted EBIT and adjusted net income and for dividend proposal for 2019 reaffirmed
- Increase in economic net debt higher due predominantly to seasonal and accounting effects
- Planned takeover of innogy on schedule
E.ON’s core businesses — Energy Networks, Customer Solutions and Renewables — started off the new financial year by again delivering a predominantly strong operating performance in all markets except the United Kingdom. Earnings at E.ON’s networks business were nearly at the prior-year level. The company’s renewables business significantly increased its earnings. The earnings decline at the customer solutions business is primarily attributable to the special situation in the United Kingdom. Earnings there were considerably lower, principally because of a new regulatory price cap.
“Aside from the special case of the United Kingdom, our core businesses delivered a solid performance. We can therefore unequivocally reaffirm our forecast for the 2019 financial year. We continue to expect our 2019 adjusted EBIT to be between €2.9 and €3.1 billion and our 2019 adjusted net income to be between €1.4 and €1.6 billion. We likewise reaffirm our dividend proposal of 46 cents per share for the 2019 financial year,” CFO Marc Spieker said at the presentation of the company’s results for the first quarter of 2019.
E.ON’s first-quarter sales rose by roughly €0.4 billion year on year to €9.2 billion. Compared with the extraordinarily strong prior-year quarter, the E.ON Group’s adjusted EBIT declined by 8 percent, from €1.3 billion to €1.2 billion. Adjusted net income of €650 million was below the prior-year figure of €727 million.
Adjusted EBIT of €623 million at the Energy Networks segment was at the prior-year level (€642 million). The Customer Solutions segment’s adjusted EBIT decreased significantly year on year, from €392 million to €219 million. The decline in Germany, which is due to a delay in the passthrough of pass higher grid fees to customers, is purely temporary. It likely will fully balance itself out as the year moves forward. E.ON’s customer numbers continued to develop well in Germany’s keenly competitive marketplace. Since the start of the year, the company has added more that 100.000 customers on a net basis. By contrast, Customer Solutions’ business in the United Kingdom remained under considerable pressure. The new regulatory cap for power prices and keen competition were the primary reasons for the €90 million decline in E.ON’s earnings there. The Renewables segment’s adjusted EBIT rose by 23 percent year on year, from €171 million to €211 million. The increase resulted primarily from an increase in output due to the commissioning of offshore wind farms in Germany and the United Kingdom and an onshore wind farm in the United States. The Non-Core Business segment recorded adjusted EBIT of €164 million compared with €109 million in the first quarter of the prior year. The performance of the generation business in Turkey was particularly good. Its hydroelectric stations considerably increased their output relative to the prior-year period.
Due to the decline in E.ON’s adjusted EBIT, its adjusted net income of €650 million was below the prior-year figure of €727 million. Compared with the figure at year-end 2018 (€16.6 billion), the company’s economic net debt increased by about €2.3 billion to €18.9 billion. This was primarily due to the initial application of an IFRS and the further decline in interest rates, which necessitated an increase in provisions for pensions despite the positive development of plan assets. E.ON’s first-quarter investments in its core business rose from €535 million to €566 million. The company invested more than half — €300 million — in smart grids, which will provide growth and stable earnings going forward.
The planned transaction with RWE is right on schedule. E.ON’s filing of the planned takeover with the European Commission in January marked an important milestone. In late February RWE received approval from Brussels and Bonn for the takeover of E.ON’s and innogy’s renewables businesses and for the planned acquisition of a stake in E.ON. As anticipated, in early March the Commission opened an in-depth investigation. The preparations for the planned takeover of innogy are generally moving forward on schedule. E.ON is therefore confident that it will obtain the necessary approvals in the second half of 2019.