Germany: E.ON Announces 2011 Results

E.ON AG continued its consolidation course in a difficult business environment in 2011 and is past the worst. At the presentation of the company’s annual results, CEO Johannes Teyssen was cautiously optimistic about where E.ON stands.

“We made good progress implementing our strategy. E.ON 2.0, our efficiency-enhancement program, is on course. We’re pleased by the significant earnings growth in renewables, power generation in Russia, and gas production. This demonstrates that we defined the right growth businesses. We also made progress establishing operations outside Europe. Our planned entry into Brazil’s power generation market will be a first important step, and we expect others to follow shortly. For 2012, we expect to post an earnings increase that will continue in subsequent years.”

E.ON’s 2011 results were in line with its expectations. Sales rose by 22 percent year on year to about €113 billion. The increase was due in particular to higher sales at the company’s Trading unit.

E.ON’s EBITDA of about €9.3 billion was 30 percent below the prior-year figure. The principal reasons for the decline were an €2.5 billion adverse effect relating the imme-diate shutdown of nuclear power stations in Germany and the nuclear-fuel tax, a roughly €1 billion earnings reduction from E.ON’s power generation business in Europe, and a roughly €0.7 earnings reduction in the gas wholesale business due to continued margin pressure.

The earnings performance of E.ON’s growth businesses continued to be positive. The Renewables unit grew its EBITDA by 21 percent to around €1.5 billion, mainly be-cause of an increase in installed wind and solar capacity. Earnings in Russia improved by nearly 50 percent to about €0.6 billion, owing primarily to an increase in generating capacity and wider power margins. Upstream gas earnings rose to roughly €0.8 billion due to positive price and volume effects. In addition, E.ON’s ongoing efficiency-enhancement programs delivered lasting earnings effects totaling €0.4 billion.

Teyssen emphasized that E.ON generates a significant portion of its earnings in very stable businesses. The overall share of regulated as well as quasi-regulated and long-term contracted business amounted to about 50 percent of EBITDA in 2011. “These stable earnings streams give us a strong foundation for running our business soundly even in difficult times, for successfully meeting current and future challenges, and for tapping new, profitable growth business,” Teyssen said. For example, E.ON plans to invest €7 billion in renewables over the next five years, of which just over €2 billion will go towards new offshore wind farms in Germany, the United Kingdom, and Sweden.

E.ON’s underlying net income declined by nearly 50 percent year on year to about €2.5 billion, mainly because of the decline in EBITDA. Amortization was at the prior-year level, and economic interest expense improved due to the reduction in net debt.

E.ON’s investments in property, plant, and equipment, intangible assets, and share-holdings amounted to roughly €6.5 billion in 2011, about €1.8 billion less than in the prior year.

At €6.6 billion, E.ON’s cash provided by operating activities of continuing operations was considerably below the prior-year figure of €10.6 billion. The main reasons for the decline were cash-effective items in conjunction with the decrease in EBITDA, a non-recurring adverse effect relating to the refunding of pension assets, and overall negative working-capital effects.

The E.ON Group’s economic net debt stood at €36.4 billion at year-end 2011, €1.3 billion less than at year-end 2010. Its net financial position improved by more than €2 billion.

E.ON anticipates that its 2012 EBITDA will be between €9.6 billion and €10.2 billion and that underlying net income will be between €2.3 and €2.7 billion. This implies a conservative assumption for the gas supply and sales business. It continues to plan to pay a dividend of €1.10 per share for the 2012 financial year.

For 2013, E.ON continues to expect EBITDA of €11.6 to €12.3 billion and underlying net income of €3.2 to €3.7 billion. It continues to plan to pay a dividend of at least €1.10 per share for the 2013 financial year.

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Offshore WIND staff, March 14, 2012; Image: eon