RWE AG, Germany’s second-largest utility, will cut 2,400 jobs to reduce costs as plunging demand for power and natural gas left first-half profit stagnant.
Job cuts “are essential to maintaining the market competitiveness of RWE,” Chief Executive Officer Peter Terium, who took the helm on July 1, said today in a statement. “Mounting state intervention in the energy sector, shrinking power plant margins and fierce competition in electricity and gas supply are all challenges.”
Recurrent net income, the measure used to calculate RWE’s dividend, was 1.67 billion euros ($2.1 billion), the same as a year earlier, the Essen-based company said. That missed the average estimate of 1.71 billion euros from 11 analysts surveyed by Bloomberg. Sales slid 1.3 percent to 27.1 billion euros as sales of gas fell 11 percent and electricity declined 8 percent.
RWE and EON AG are cutting costs and selling assets after German Chancellor Angela Merkel ordered the permanent halt of all nuclear reactors by 2022 following Japan’s Fukushima atomic meltdown. RWE’s earnings were hurt by lost sales after two atomic plants were taken off line in the first wave of shutdowns. It had already announced plans to eliminate 5,000 positions and cut 3,000 further workers through divestments.
RWE rose 0.6 percent to 33.14 euros by the Frankfurt close.
Two-thirds of job will be lost in Germany, Alwin Fitting, a management board member, said on a call. Terium wouldn’t rule out further cuts, saying economies were needed after 2014.
“RWE will always have to work on efficiency, and labor costs are one component,” Thomas Deser, a portfolio manager at Union Investment GmbH responsible for the fund’s 93 million-euro stake in RWE, said today by phone from Frankfurt.
The utility plans to set up a company to manage the conventional power plants of RWE Power, RWE Npower in the U.K. and Essent in Germany from the start of next year, led by Matthias Hartung, chief executive officer of RWE Technology GmbH. It will be based in the state of North Rhine-Westphalia, Annett Urbaczka, a spokeswoman, said today by phone from Essen.
RWE, which confirmed its full-year target of stable recurrent net income and operating profit, has begun a cost-cutting program seeking to boost earnings by 750 million euros next year and an annual 1 billion euros by the end of 2014. The dividend will probably hold at 2 euros for 2012, Deser said.
RWE said it renegotiated more than half its oil-indexed gas contracts and has yet to reach an agreement with OAO Gazprom.