Nov. 14 (Bloomberg) -- RWE AG, Germany’s second-largest utility, said profit will drop by almost half next year as power prices fail to recover. The company plans to cut about 10 percent of its workforce.
Recurrent net income, the measure used to calculate the dividend, will fall to 1.3 billion euros ($1.8 billion) to 1.5 billion euros from about 2.4 billion euros forecast for this year, the Essen-based utility said today in a statement.
“The company is passing through a vale of tears,” Chief Executive Officer Peter Terium said on a call with reporters. “The level of results achieved this year is something we will not see again for the foreseeable future.”
The company and larger competitor EON SE are cutting costs and selling assets after wholesale electricity prices tumbled, making many power plants unprofitable. Germany’s move toward wind and solar energy, which now account for more than 20 percent of generation and take preference on the grid, has forced prices down.
RWE sank 5.1 percent, the biggest one-day decline in more than three months, to close at 25.76 euros in Frankfurt. Trading volumes were more than four times the three-month daily average.
The company is making slow progress in selling its Dea oil and gas unit, said Thomas Deser, a portfolio manager at Union Investment GmbH who is responsible for the fund’s 69 million-euro stake in RWE. Instability in Egypt, where Dea has gas operations, and stagnant oil and gas prices have made the disposal difficult, he said by phone from Frankfurt.
RWE plans to reduce costs by at least a further 500 million euros by 2017, according to CEO Terium. Without cuts, its power generation division can’t remain profitable, he said on the call.
The utility will lose 6,750 jobs by 2016, including 1,400 workers at Dea, it said. That will reduce staff to less than 61,000. RWE wants to discuss a wage freeze from 2015 after an agreement with unions expires and doesn’t rule out further job cuts after 2016, Chief Human Resources Officer Uwe Tigges said on the call.
“RWE is throwing numbers around as if we were chips in a bingo hall,” Peter Hausmann, the member responsible for tariff policy at the Industriegewerkschaft Bergbau, Chemie, Energie trade union directorate, said in an e-mailed statement. “For the employees, it’s more than their nerves can bear.”
RWE missed analyst estimates for the sixth quarter in seven, according to Bloomberg Industries. The company reported a recurrent net loss of 73 million euros in the third quarter, compared with a profit of 227 million euros a year earlier. The result was calculated by subtracting half-year earnings from nine-month results published today.
Profit by that measure rose 1.2 percent to 1.92 billion euros in the first nine months of 2013, missing the 2.03 billion-euro average estimate of five analysts surveyed by Bloomberg. Sales advanced 4 percent to 39.9 billion euros, according to today’s statement.
RWE confirmed its full-year target for recurrent net income of about 2.4 billion euros, near last year’s level.
EON said yesterday that 2013 profit will be at the lower end of its forecast as it reported a 52 percent decline in nine-month profit.
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