• Weaker pound, U.S. dollar weigh on Spanish utility's profit
  • Company faces political uncertainty in biggest markets

Iberdrola SA, Spain’s largest power company, said first-quarter profit declined 6 percent, driven by a weaker pound and dollar as well as the absence of one-time items that boosted earnings a year ago.

Earnings before interests, taxes, depreciation and amortization fell to 2 billion euros ($2.3 billion) from 2.1 billion a year earlier, the Bilbao, Spain-based utility said Wednesday in a statement. That compared with the 2.06 billion-euro average estimated by nine analysts surveyed by Bloomberg. Sales fell to 8.18 billion euros from 8.78 billion a year ago.

The company was also hit by declining power prices, with wholesale costs in Spain falling to about 30 to 31 euros per megawatt-hour in 2016 from about 48 euros in 2015, according to Deutsche Bank AG. 

Iberdrola’s stock faces headwinds from political uncertainty in its two biggest markets. Spain is heading for the second election since December amid concerns a new government may bring in electricity sector reforms. The U.K. is preparing for a referendum on European Union membership.

Iberdrola dropped 6 percent this year, compared with a 1.6 percent decline for the MSCI Europe Utility Sector index.

The utility announced in February that it would most likely have a weak first half relative to last year, driven in part by having recorded non-recurring items in 2015. 

The U.K., which accounts for 30 percent of profit, was one of the key drivers behind the decline in profit, as the pound weakened 8.6 percent to the euro in the first quarter. The dollar fell 5.7 percent relative to the euro.

Standard & Poor’s last week increased Iberdrola’s credit rating one step to BBB+ from BBB, citing the 2016-2020 business plan unveiled in February. Moody’s Investors Service raised the company’s credit outlook on Monday.

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