ROUNDUP 2: Energy company Eon looks to the future with optimism | 03/24/21


(new: details from the conference call, share price updated, analyst comments)

ESSEN (dpa-AFX) – The energy group Eon (EON SE) survived the Corona year 2020 without major scratches. The Management Board is now optimistic about the future. Based on the progress made in the integration of Innogy (innogy SE) and the positive developments in nuclear energy and in the UK business, the group expects an increasing result for 2021. And it should also go up in the following years. Eon announced this on Wednesday in Essen. The share showed fluctuations in the course of the morning, most recently it was again just under 0.3 percent in the red.

One trader called the report solid. The profitability was better than expected in the past year and the outlook is in line with expectations. He praised the progress made in the UK business. Eon has made the turnaround there: the result in this division will make a positive contribution to the result again this year with more than 100 million British pounds, the Dax group announced. For analyst Deepa Venkateswaran from the US analysis company Bernstein Research, the outlook for 2021 is even slightly better than expected. The continued reduction in net debt is encouraging, comments investment bank Jefferies.

For 2021, Eon is now expecting an increase in adjusted operating profit (EBIT) across the group to 3.8 to 4.0 billion euros, and the adjusted consolidated net profit should come out between 1.7 and 1.9 billion euros. The group emphasizes that this forecast already includes all assessable corona risks. Between 2021 and 2023, CFO Marc Spieker expects an increase of 8 to 10 percent per year at the EBIT level. “In particular, we will see a noticeable increase in earnings in the core business of 11 to 13 percent, which will more than compensate for the declining results from German nuclear energy,” said the manager, according to the announcement.

The group is also confident when it comes to net debt: “Even after the Innogy takeover and during the crisis, we kept our debt within the announced range through operational excellence and careful capital management, as promised,” said the outgoing CEO Johannes Teyssen on Wednesday at his last Annual press conference. Teyssen is handing over the chief position to Leonhard Birnbaum on April 1st. Teyssen has been on the Eon board since 2004 and has chaired it since 2010. Birnbaum has been a member of the Eon board since 2013.

Eon specified the debt target on Wednesday to 4.8 to 5.2 times earnings before interest, taxes, depreciation and amortization (Ebitda) and assumes that it will be able to achieve this target with good chances this year – assuming today’s interest rate level . For comparison: In 2020 the debt factor was 5.9, as Chief Financial Officer Spieker explained to journalists.

The past year was only partially dominated by Corona: Because electricity demand collapsed in the first lockdown around a year ago, Eon corrected its forecast downwards in the summer. However, the situation recovered over the course of the year. With targeted countermeasures such as efficiency increases, but also thanks to increasing customer numbers, the group was able to limit the effects of the pandemic, according to the information, the negative earnings effects were almost 300 million euros. The corona crisis does not leave any lasting traces as a result, it said on Wednesday.

Eon 2020 achieved the targets adjusted in the summer: Adjusted EBIT rose to just under 3.8 billion euros in the past year, compared to 3.2 billion euros in the previous year on a pro forma basis. Adjusted consolidated net income in the past year was a good 1.6 billion euros after 1.5 billion euros on a pro forma basis in 2019. The figures are slightly above the analysts’ expectations. However, the adjusted net income does not include the one-time integration costs of Innogy. Including these costs, consolidated net income fell in 2020.

The group reports the comparative figures from the previous year on a pro forma basis, as the 2020 balance sheet is the first in the new group structure after the swap deal with RWE. In the course of this large-scale reallocation of the electricity market in Germany, Eon took over the energy networks and customer business of the RWE subsidiary Innogy and sold its renewable energies to RWE. Since then, Eon has been operating the most comprehensive power grid in Germany with a length of around 700,000 kilometers and supplies almost 14 million customers with electricity.

On the stock market, the deal had given RWE in particular a boost, while Eon had benefited less from the swap. Teyssen admitted that he would have liked “a better course to say goodbye”. But he also emphasizes: “If you see the prices at which networks are traded, I see great potential to catch up.” The markets were unsettled because of the debt and the issue of nuclear energy. These two problem children can now be “buried”.

Ultimately, Eon was able to close the 2020 financial year without any significant impact “either due to the Covid 19 pandemic or the historically warm winter”, explained the outgoing Eon boss Teyssen. As expected by analysts, Eon wants to pay its shareholders a dividend of EUR 0.47 for 2020 (previous year: EUR 0.46). The distributions are to increase annually by up to 5 percent until 2023, according to the group. “After that, too, we aim to increase the dividend annually,” said CFO Spieker.

In addition to the corona crisis, the swap deal with RWE was the big topic for Eon last year. The deal was finally closed and the former RWE subsidiary Innogy was integrated into the Eon Group. The planned synergy targets will be achieved as expected, Eon confirmed on Wednesday. The group aims to achieve EUR 780 million in recurring savings by 2024. Of this, 130 million euros had already been realized by the end of 2020.

In addition, the group refers to the positive development in terms of nuclear energy. With the agreement with the federal government, Eon could now largely close the chapter on nuclear power. In addition, the agreement also benefits Eon financially. Eon expects an inflow of funds in the middle, three-digit million amount in the course of this year./knd/ssc/fba

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ROUNDUP Energy company Eon future optimism


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