Eneco reports increase net profit
Positive development of result in first half of 2011
• 77% Increase in net profit to € 133 million (€ 75 million)• Operating profit € 225 million (€ 145 million)• Stable revenues• Cost reductions have positive effect• Every part of the organisation contributes• Safety performance improved• Full year 2011 outlook: significant improvement
“Eneco reports an increase in net profit over the first half of 2011", says Jeroen de Haas, Chairman of the Board of Management of Eneco Group in a statement concerning the results.“The profit improvement, to which every part of the organisation has contributed, is the result of a combination of cost reductions and higher revenues from energy sales and energy transmission. The first half of 2011 was characterised by far-reaching events in different parts of the world, the effects of which will be felt for a long time to come. According to Eneco, this turbulent climate confirms the need for investments in sustainable energy in order to be able to supply sufficient affordable energy in the future. We are seeing an increase in the demand for integrated sustainable energy solutions and cooperate with market participants and government bodies to realise our sustainability objectives."
"Barring unforeseen circumstances, we expect the net profit over 2011 to show substantial improvement compared with 2010.”
Financial results for the first half of 2011 improved
Eneco Holding N.V. achieved a net profit of € 133 million for the first half of 2011, an increase of € 58 million (77%) compared with the first half of 2010 (€ 75 million). Adjusted for non-recurring costs of € 7 million relating to the unbundling and restructuring in the first half of 2011 (2010: € 35 million) and for the related tax effect, the increase in the net profit for the first half of 2011 was 37%.Total revenues remain stable at € 2,512 million. Gross margin and other revenues rose by € 52 million to € 818 million, mainly as a result of the improved gross margin on the gas portfolio and higher regulated transmission tariffs.Operating expenses fell by € 28 million to € 593 million, including one month of operating expenses of Oxxio that was acquired on 1 June. Employee benefits fell by € 11 million, partly as a result of the restructuring in 2010 and further cost savings within the staff departments in 2011. The rise in depreciation was in line with increased capital expenditure. The consolidated operating profit was € 225 million, an increase of 55% compared with 2010 (€ 145 million). All business units saw an improvement in operating profit.
The cash flow from operating activities for the first half of 2011 was € 424 million compared with € 88 million a year earlier.
Eneco group is making substantial investments in the construction of sustainable energy installations. The construction of several wind farms in the Netherlands and Belgium with a total capacity of 50 MW was started in the first half of 2011. Investment decisions that were made included the construction of the Lochluichart (51 MW) wind farm in Scotland and a wood-fired biomass plant (49 MW) in the Dutch municipality of Delfzijl.
Compared with the same period last year, the operating profit of the energy company rose by € 19 million to € 92 million. The largest proportion of this growth came from trading activities, despite the extreme events that affected the global energy market such as the earthquake in Japan, the sudden closure of nuclear power plants in Germany and the disturbances in oil producing countries. Substantial improvements were made in the areas of purchasing and optimisation of the gas portfolio. In contrast, margins on conventional (gas-powered) electricity generation were under pressure.
On balance, the weather had an adverse effect on the energy company’s operating profit compared with 2010. The higher temperatures in 2011 compared with 2010 negatively impacted the sales volumes of gas and heating and so the margin (€ 13 million) of the Energy Trading, Supply and Heating & Cooling business units. It was, however, windier than the year before and this benefited electricity generation at the wind farms (€ 6 million).Oxxio was acquired on 1 June 2011 and has been recognised in the results and balance sheet since then. As it took place only recently, the acquisition has not had a substantial effect on the first half year results.
Stedin’s operating profit rose by € 26 million compared with 2010 to € 137 million. Revenues were € 29 million higher, largely as a result of the higher transmission tariffs set for 2011 by the Netherlands Competition Authority (NMa) in connection with the necessary increase in investments in the networks. Operating expenses were € 3 million higher than in 2010, mainly due to higher costs for preventive maintenance and depreciation of the network and to higher employee benefits in connection with activities taken over from Eneco Holding. Against this there were lower network losses.
Joulz enjoyed a good half year financially. As a result of an improved gross margin, lower indirect costs and the restructuring provisions formed last year, the operating profit at Joulz was over € 22 million up on 2010 (2011: € 6 million; 2010: operating loss of € 16 million).The gross margin on activities improved in absolute (€ 3.7 million) and relative (9%) terms compared with the equivalent period last year. The improvement was achieved despite a slight fall in revenues, chiefly because revenues in 2010 being positively affected by a major contract for the Enecogen gas plant.Joulz has won contracts with companies other than regular Stedin contracts in excess of € 100 million.
The reorganisation of the indirect functions in mid-2010 has clearly borne fruit. Consequently, indirect expenses were about € 5 million lower in the first six months of this year. Along with a number of other cost savings, total indirect expenses were about € 9 million below those of 2010.
Barring unforeseen circumstances, we expect the net profit over 2011 to show substantial improvement compared with 2010.