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RWE Quarterly Profit Rises on Cost Savings, Gas Contracts

May 15 (Bloomberg) -- RWE AG’s first-quarter profit beat analysts’ consensus estimates for the first time in more than a year, rising as Germany’s second-largest utility cut costs.

Recurrent net income, used to work out dividends, gained to 1.30 billion euros ($1.7 billion) from 1.29 billion euros, the Essen-based company said today in a statement. The result beat the 1.20 billion-euro average of eight estimates compiled by Bloomberg, exceeding consensus for the first time in five quarters. Sales gained 2.9 percent to 16.1 billion euros.

“Recurrent net income is slightly above my expectations,” Daniel Seidenspinner, a B. Metzler Seel Sohn & Co. KGaA analyst, said from Frankfurt. “Efficiency measures are effective. One-time effects helped, e.g. the cold weather increased gas use.”

The utility and larger rival EON SE are reducing costs and selling assets after German Chancellor Angela Merkel ordered the closing of all nuclear reactors by 2022 following the Fukushima disaster in Japan. RWE said in March it would sell its Dea oil unit to cut spending. It’s seeking to raise as much as 5 billion euros from the sale, a person familiar with the matter said.

RWE affirmed its full-year target for recurrent net income of 2.4 billion euros and operating profit of 5.9 billion euros, below last year’s level, according to today’s statement.

“Positive effects from the efficiency program and improvements in gas procurement conditions were contrasted by substantial earnings shortfalls in the conventional power generation business,” it said. “These factors will continue to have an impact on business performance for the year.”

RWE fell 0.7 percent to 27.41 in Frankfurt, while EON dropped 0.5 percent to 12.95 euros.

EON last week reported a 16 percent decline in first-quarter earnings because of asset sales, lower output and narrower margins in power generation from fossil fuels.

To contact the reporter on this story: Tino Andresen in Dusseldorf at tandresen1@bloomberg.net

To contact the editor responsible for this story: Will Kennedy at wkennedy3@bloomberg.net

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