EON Keeps 2014 Outlook as Quarterly Loss Widens on Currency

EON SE restated its full-year profit forecast even as Germany’s biggest utility reported a wider third-quarter loss as a weaker ruble crimped earnings from Russia and power prices declined.

The underlying net loss was 90 million euros ($112 million) compared with 6 million euros a year earlier, according to figures derived by subtracting first-half earnings from nine-month results reported by the Dusseldorf-based company today.

German Chancellor Angela Merkel’s shift toward renewables from nuclear has led to a surge in wind and solar generation, cutting power tariffs already weakened by slow European economic growth. EON, expanding abroad as it considers the need to shut plants at home, plans to reduce spending and is selling assets to cut costs. EON reiterated its 2014 forecast for underlying net income of 1.5 billion euros to 1.9 billion euros.

“It’s positive that the guidance has been confirmed,” Thomas Deser, a fund manager at Union Investment, one of EON’s 10 biggest shareholders, said by phone from Frankfurt. “From an investor’s perspective EON is a reliable alternative among European utilities.”

EON fell 3.4 percent, its biggest decline in four weeks, to close at 13.085 euros in Frankfurt. It was the second-biggest loser on the benchmark Dax index.

German year-ahead wholesale power prices averaged 35.19 euros in the third quarter and were 0.6 percent below last year’s level, according to data compiled by Bloomberg.

Lower Profit

Underlying net income, used to calculate dividends, declined 25 percent to 1.44 billion euros in the first nine months of the year from a year earlier, according to a statement. That was in line with the 1.45 billion-euro average of six estimates compiled by Bloomberg. Sales fell 8.9 percent to 81.3 billion euros.

“The absence from earnings streams from divested companies and adverse currency-translation effects were the main factors” for the lower nine-month profit, EON said. The company is concerned about the ruble exchange rate, Chief Financial Officer Klaus Schaefer said on a conference call with reporters.

The company’s net loss was 14 million euros in the period, EON said in a presentation to investors. That compares with net income of 2.61 billion euros in the first nine months of 2013, when the company saw a 1.8 billion-euro book gain, six times as much as in the current period, Schaefer said.

Smaller competitor RWE AG is scheduled to report its nine-month results tomorrow.

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