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EON Gains in Frankfurt as First-Half Beats Profit Estimates

EON SE surged the most in almost seven weeks in Frankfurt trading after Germany’s biggest utility beat analyst earnings estimates for an eighth time out of 10.

EON rose 2.2 percent, the most since June 26, to close at 12.50 euros. First-half underlying net income, used by EON to set dividends, fell 42 percent to 1.91 billion euros ($2.54 billion) from 3.3 billion euros a year earlier, as lower power prices forced the Dusseldorf-based company to keep plants idle, it said today in a statement. That beat the 1.79 billion-euro average estimate of seven analysts surveyed by Bloomberg.

Sales dropped 1.2 percent to 64.6 billion euros.

“Profit is slightly better than expected,” said Sven Diermeier, an analyst at Independent Research GmbH.

German utilities are contending with lower demand, power prices near record lows and rules supporting wind and solar. EON today kept its target for underlying net income of 2.2 billion euros to 2.6 billion euros for 2013 even as Chief Financial Officer Marcus Schenck told reporters risks had increased.

Conditions in Europe’s generation industry “will adversely affect our earnings for many years to come,” Schenck said.

Adjusted earnings before interest, taxes, depreciation and amortization from combined-cycle gas turbines slumped by 80 percent to 24 million euros from a year earlier.

EON shrank conventional generation capacity 2,400 megawatts in the first half and plans a further cut of 1,700 megawatts, it said. Total reductions may exceed the 11,000 megawatts announced previously, Chief Executive Officer Johannes Teyssen said. EON, expanding abroad even as it studies plant shutdowns at home, plans to cut capital spending and sell assets to lower costs.

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