EON Sees 2014 Profit Down as Much as 33% on Sales, Russia

EON SE, Germany’s biggest utility, expects profit to fall as much as 33 percent this year on asset sales and lower earnings from its Russian and commodities units.

Underlying net income, the measure EON uses to calculate its dividend, will drop to 1.5 billion euros ($2.1 billion) to 1.9 billion euros from 2.24 billion euros in 2013, the Dusseldorf-based company said today in a statement.

Chancellor Angela Merkel’s shift of the domestic energy market toward renewables and away from nuclear has resulted in a surge in wind and solar power, now 24 percent of generation. That has cut electricity prices, which were already weakened by a decline in demand amid Europe’s economic crisis.

“The ramifications of policy decisions in Germany and the related insufficient market prices for conventional energy continue to have an adverse impact on our generation portfolio, which has long been a mainstay of our business,” Chief Executive Officer Johannes Teyssen said in the statement.

EON’s 2013 earnings, 46 percent lower than a year earlier, were roughly in line with the 2.26 billion-euro average estimate of 17 analysts surveyed by Bloomberg. The utility will propose a dividend of 60 euro cents a share for 2013 at its annual general meeting next month, compared with 1.10 euros the previous year.

Dividend Policy

EON reiterated a policy to pay out 50 percent to 60 percent of underlying net income in dividends, while proposing an option to take shares. The stock rose 2.7 percent, the biggest one-day gain in two months, to close at 13.785 euros in Frankfurt.

“It’s good that EON confirmed its dividend policy” even as the share proposal may dilute investors, Sven Diermeier, an analyst at Independent Research GmbH, said by phone from Frankfurt. “The profit outlook is weaker than I had thought.”

The average earnings estimate of 22 analysts surveyed by Bloomberg is for 1.87 billion euros this year.

EON, expanding abroad as it closes more than a quarter of its conventional plants in Europe, reported net income of 2.14 billion euros on sales of 122.5 billion euros. Smaller competitor RWE AG, also suffering from slumping power prices, last week posted its first loss since the Federal Republic of Germany’s founding in 1949.

In the fourth quarter, EON’s underlying net income more than doubled to 336 million euros. Sales retreated 14 percent to 33.1 billion euros. Both were calculated by subtracting nine-month results from full-year earnings published today.

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