E.ON H1 highlights
Adjusted EBIT up 7%; outlook unchanged; upstream operations considerably expanded; wind farms in Spain and Portugal acquired.
The E.ON Group continued its positive earnings performance in the H1 of 2007. It increased sales by 4% year on year to €35.6 billion (prior year: €34.2 billion) and adjusted EBIT by 7% to €5.4 billion (€5.1 billion). At €4 billion, net income attributable to shareholders of E.ON AG was 26% above the high prior-year figure (€3.1 billion). Adjusted net income was up by 9% to €3.1 billion (€2.8 billion).
The Central Europe market unit’s adjusted EBIT of €2,544 million was slightly above the prior-year figure (€2,495 million). The negative factors in the electricity business included higher electricity procurement costs, lower results from power trading, higher expenditures resulting from an increase in the amount of renewable-source electricity delivered onto the network, and a decline in earnings from network charges. The development of electricity prices had a positive effect on adjusted EBIT.
The mild winter led to significant declines in sales volume and adjusted EBIT at Central Europe’s gas business. At €1,631 million, Pan-European Gas’s adjusted EBIT was slightly below the prior-year figure (€1,697 million), primarily due to a weather-driven decline in sales volumes and lower earnings from storage valuation.
The UK market unit posted a sharp increase in adjusted EBIT, which rose by 63% to €741 million (€455 million), mainly due to lower gas procurement costs, which had been substantially higher in the prior-year period because of a gas supply bottleneck. Nordic’s adjusted EBIT was also significantly higher, rising 12% to €475 million (€425 million). The main factors were higher electricity sales volumes and successful hedging for the production portfolio. US Midwest’s adjusted EBIT declined by 7% to €176 billion (€190 million) due to currency factors.
E.ON adjusted its outlook upward in the first quarter of 2007. Based on its continued positive operating performance in the second quarter, E.ON continues to expect adjusted EBIT for full year 2007 to surpass the high prior-year level. The company expects an increase of 5 to 10%. From today’s perspective, E.ON also continues to anticipate an increase in net income attributable to shareholders of E.ON AG.
In late May, E.ON announced a package of initiatives containing ambitious targets for its further development. E.ON’s objectives are to enhance its performance, deliver sustainable earnings increases, achieve a significantly more efficient capital structure. At the same time, E.ON is increasing its investment program to €60 billion in order to achieve sustainable, value-enhancing growth.
Since making the announcement, E.ON has already had its first successes implementing the initiatives: E.ON has acquired Energi E2 Renovables Ibéricas, a wind farm operator, from Dong Energy, a Danish power company, for €722 million. The acquisition marks E.ON’s first big step towards the expansion of its renewable energy operations. E.ON intends to invest about €3 billion in renewables through 2010 and play a leading role in climate protection.
E.ON has significantly enlarged its position as a gas producer by acquiring 28% of Skarv and Idun, important untapped natural gas fields in the Norwegian North Sea. Investments to acquire a share in the fields and tap their reserves total just under €2 billion. In late June 2007, E.ON launched a €7-billion share buyback program designed to optimize its capital structure. E.ON intends to repurchase €3.5 billion of its own stock by the end of 2007 and complete the buyback by the end of 2008.
By August 10, 2007, E.ON had already repurchased about 9 million of its own shares, or about 1.3% of its capital stock, at a value of approximately €1.1 billion. E.ON CEO Wulf H. Bernotat said: “By rapidly implementing our ambitious package of initiatives, we’re demonstrating that we’re working hard to meet our growth targets and boost our performance. At the same time, E.ON’s positive development in the current year underscores that we have the right strategy.” (oilvoice)
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