Engie First-Quarter Profit Falls on Currencies, Warm Weather

  • French utility reiterates its forecast for full-year Ebitda
  • Benefit of cost cuts, reactor startups offset by real, prices

Engie SA, the French utility, said first-quarter earnings fell 1.7 percent as the weaker Brazilian real, a drop in oil and gas prices and warmer-than-average weather in France offset the restart of nuclear reactors in Belgium.

Earnings before interest, tax, depreciation and amortization fell to 3.5 billion euros ($4 billion) from 3.56 billion euros a year earlier as revenue dropped 13 percent, Engie said Friday in a statement. Stripping out the exchange rate, acquisitions and asset sales, Ebitda rose 2.3 percent in the period. The company, based in Courbevoie outside Paris, affirmed its full-year forecasts.

“In a context of difficult market conditions for commodity prices, and also despite the negative temperature impact in France, we delivered solid results,” Chairman and Chief Executive Officer Gerard Mestrallet said Friday on a conference call.

Engie said in February that it will sell 15 billion euros of assets and cut 1 billion euros of costs by 2018 to reduce its exposure to oil, gas and power prices that have been undermined by a supply glut and government subsidies for clean energy. The company will increase its presence in energy services and assets that command more predictable prices, such as renewable power.

Cost Savings

Cost savings added about 100 million euros to first-quarter Ebitda, in line with a plan to save 500 million euros this year, Chief Financial Officer Judith Hartmann said on the call. Lower oil and gas prices cut earnings by about 100 million euros, she said.

Engie reiterated its forecast for full-year Ebitda of 10.8 billion to 11.4 billion euros, excluding the negative impact of asset sales, while net recurring income will be 2.4 billion to 2.7 billion euros.

Shares of Engie were little changed at 14.42 euros at 10:44 a.m. in Paris, bringing this year’s drop to 12 percent.

The company sold about 400 million euros of assets, including a stake in a power-transmission line project in Chile, in the first quarter, the company said. It already announced plans to sell 5.5 billion euros of U.S. and Asian assets in February, and another 500 million euros of assets may be sold this year, the CFO said.

Engie may sell a minority stake in its Belgian nuclear and energy-services operations to partners or on the stock market next year, Mestrallet said.

The company has accepted that its French gas business will lose market share as it focuses on higher-margin customers, Deputy-CEO Isabelle Kocher said on the call. The former French gas monopoly has about 30 percent of the business-to-business market and about 80 percent of the business-to-consumer market, she said.

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