RWE Lifts 2012 Goals as Profit Rose in First Nine Months

RWE AG, Germany’s second-largest utility, increased a full-year profit forecast after earnings rose on an improved performance from its trading business.

Operating results for 2012 may exceed the 5.81 billion euros ($7.39 billion) reported in 2011, the Essen-based company said today in a statement. The company had previously expected to match last year’s level.

The increased forecast comes after EON AG abandoned its 2013 targets, sending its shares down by a record yesterday. RWE, which didn’t give guidance for next year, and EON are cutting costs and selling assets after Chancellor Angela Merkel ordered the permanent halt of all nuclear reactors by 2022 following Japan’s Fukushima disaster.

“The quality of the raised outlook shouldn’t be overestimated given that improved, but naturally volatile, trading results primarily triggered the upgrade,” Michael Schaefer, an analyst at Equinet AG in Frankfurt, said in a note to clients.

RWE’s forecast for recurrent net income, which is adjusted for exceptional items and is used to calculate the dividend, was left unchanged and is expected to match last year’s 2.48 billion euros.

In Line

Recurrent net income climbed 6.2 percent to 1.89 billion euros in the first nine months of 2012 from a year earlier, according to a statement statement. That was in line with the 1.88 billion-euro average estimate of seven analysts surveyed by Bloomberg. Sales advanced 0.5 percent to 38.4 billion euros.

In the statement, RWE said it benefited from “operational improvements, particularly in its trading business.”

Recurrent net income almost doubled to 227 million euros in the third quarter. The number was calculated by subtracting half-year earnings from nine-month results. Third-quarter sales increased 5.2 percent to 11.3 billion euros.

RWE’s operating result was up 7.9 percent to 4.61 billion euros, net income increased 33 percent to 1.88 billion euros, while earnings per share rose 15 percent to 3.06 euros per share.

Net debt increased 14 percent to 34.2 billion euros as of Sept. 30.

“Net debt remains high and will be higher than the 2011 level by the end of the year,” said Daniel Seidenspinner, an analyst at B. Metzler Seel Sohn & Co. KGaA in Frankfurt. “That’s too high a ratio because RWE has made little progress with its disposal program and is still a long way off” the targeted 7 billion euros, he said.

EON said Nov. 12 its 2013 profit forecast is no longer achievable, citing “substantial economic risks and the structural changes of the industry.” The stock plunged the most since the company was formed in June 2000, even after EON said underlying net income more than doubled in the first nine months of the year.

RWE rose as much as 3.5 percent before paring gains to trade little changed at 33.05 euros as of 10:50 a.m. in Frankfurt.

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