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EON Profit Falls 20% on Asset Disposals, Currency Swings

EON SE’s first-half profit beat analyst estimates, aided by higher earnings at the generation business of Germany’s biggest utility and cost savings. The shares rose the most in almost a year.

Underlying net income, used to calculate dividends, fell to 1.53 billion euros ($2.04 billion) in the six months from 1.91 billion euros a year earlier, the Dusseldorf-based company said today in a statement. That beat the 1.46 billion-euro average of eight estimates compiled by Bloomberg. Sales declined 13 percent to 56.1 billion euros.

German Chancellor Angela Merkel’s shift toward renewables and away from nuclear has led to a surge in wind and solar generation, cutting power prices already weakened by slow European economic growth. EON, expanding abroad as it considers the need to shut plants at home, plans to reduce capital spending and is selling assets to lower expenses.

“Generation is a bit better than expected,” said Ingo Becker, an analyst at Kepler Cheuvreux in Frankfurt, who has a reduce recommendation for the shares. “The saved refueling of the Grafenrheinfeld reactor contributed to that. Profit from non-European Union countries was slightly weaker than expected.”

Generation earnings before interest, taxes, depreciation and amortization increased 27 percent to 1.18 billion euros from a year earlier, according to the statement. Ebitda from the non-EU market fell 26 percent to 233 million euros.

Shares Gain

EON closed up 4.8 percent, the most since Sept. 11, at 13.795 euros in Frankfurt where almost three times the three month daily average was traded. It was the biggest gainer in the German benchmark DAX index.

Net income declined to 821 million euros from 3.08 billion euros a year earlier. The company reiterated its 2014 forecast of underlying net income of 1.5 billion euros to 1.9 billion euros. Kepler Cheuvreux analyst Becker estimates full-year profit may reach 1.8 billion euros.

“The reform of the Renewable Energy Law at least demonstrates that the German federal government has recognized the problems of implementing the transformation of the country’s energy system,” Chief Executive Officer Johannes Teyssen said in a letter to shareholders. “Beyond this reform, the next step is to work systematically toward a better market design.”

Second-quarter net income fell to 305 million euros from 517 million euros a year earlier. Sales retreated 16 percent to 24.3 billion euros. Both numbers were calculated by subtracting first-quarter earnings from the published half-year results.

Smaller competitor RWE AG is scheduled to report its second-quarter results tomorrow.

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