Austrian energy group Verbund’s profits rose less than expected in 2012 as electricity prices fell due to stagnating demand in the recession-hit eurozone and market upheaval in Germany, the continent’s biggest market.
European utilities have resorted to selling off assets amid weak demand from manufacturers, key consumers of energy and plunging wholesale prices in Germany, where heavy subsidies for renewables are causing a glut.
Verbund said yesterday it would pay a special dividend with cash from the sale of assets in Turkey to E.ON, lifting its shares in early trading.
But by 1142 GMT the shares had turned negative, trading down 1.7% at €16.10 and underperforming a flat European utilities sector.
“We see stagnating electricity demand,” chief executive Wolfgang Anzengruber told journalists. “The uncertainty of this environment will remain.”
Verbund said net profit rose 9% to €389mn ($507mn) in 2012, below the average estimate of 397mn euros in a Reuters poll of 10 analysts.
Amid wholesale prices close to eight-year lows in Germany, which accounts for 43% of Verbund’s production, the company’s average selling price fell to €53.6 per megawatt hour from €53.8 in 2012.
Anzengruber said Verbund was keen to acquire more hydropower assets in Germany, and said the company’s gearing of 65%, its lowest in years, should give it the flexibility to do so.
“We want to and will build out our position in Germany,” Anzengruber said.
Verbund is exiting the high-growth Turkish market with the sale of its business there to Germany’s E.ON in exchange for E.ON’s interest in eight run-of-river plants in Germany plus other assets.
The company expects a windfall of about €300mn in cash from the deal.
Verbund proposed raising its 2012 dividend to €0.60 from €0.55, more than had been expected, and said it would raise its 2013 dividend to 1 euro per share provided the deal with E.ON was successfully completed.
Earnings before interest, tax, depreciation and amortisation (EBITDA) rose 15% to €1.2bn in 2012 but the hydropower specialist forecast a 2013 drop to €1bn, saying it could not assume a repeat of 2012’s outstanding water supply.
Anzengruber said the company was hedged for 60% of its production at just over €50 per megawatt hour for the coming 12 months as of January 1, compared with €52 a year earlier, and expected to maintain this level throughout 2013.
Depa
Greek natural gas distributor Depa, due to be privatised this year, posted a 44% drop in annual profit due to a slide in demand and a one-off charge to settle disputes with its biggest client, according to preliminary figures.
Depa, which is 65% state-owned, reported net income of €106.3mn for 2012, according to a financial statement published by minority shareholder Hellenic Petroleum yesterday. It is not listed and will not officially publish annual results until later this year.
Russian energy giant Gazprom, Depa’s biggest natural gas provider, is one of five bidders in a race to buy the company, which sells gas to local electricity producers and others.
Greece’s debt woes and an excessively generous subsidy system for solar power producers have caused a liquidity crisis in the electricity market, which has hurt Depa.
Natural gas users, including power generators which account for about two-thirds of its sales, owe the company about €450mn in arrears, according to a Depa official who declined to be named. Depa had to take an emergency loan last year to pay for natural gas supplies from Gazprom.
A settlement that Depa struck in September with state-run electricity producer PPC, its biggest client, weighed on results. Depa agreed to pay PPC €94mn as part of a deal to settle the two companies’ outstanding disputes and renew their natural gas supply contract for a further eight years.
Other bidders in the race to buy Depa are Russia’s Sintez , Azeri state-owned gas firm SOCAR and two Greek consortia, M&M GasCo-Mytilineos-Motor Oil, and PPF and GEK TERNA.
Binding bids for the company are to be submitted to Greece’s privatisation agency HRADF by April 12.
Melrose
Engineering turnaround specialist Melrose reported a 38% rise in full-year pretax profit and said margins at recently acquired Elster Group improved faster than expected.
Operating margin grew by 1.9 percentage points to 14.1% at Elster, which makes meters for the energy industry.
Melrose, which follows a private equity-type model of investing in companies to improve their performance and then sell them, acquired Germany-based Elster for $2.3bn in June in its first major deal in four years.
Melrose owns companies that cater to the energy, oil and gas and mining industries, as well as the housing, construction and automotive sectors.
Pretax profit rose to £214.3mn ($324.0mn) in 2012 from £154.7mn a year earlier. Revenue increased 43% to £1.55bn. Revenue rose 7%, excluding the acquisition of Elster.
Analysts on average had expected a pretax profit of £202.1mn and revenue of £1.53bn according to Thomson Reuters I/B/E/S.
Henkel
Germany’s Henkel, a maker of washing powder and shampoos, said it expected earnings to rise to another record this year after reporting its highest-ever profit in 2012, driven by emerging markets and cost controls.
Henkel, whose brands include Persil, Schwarzkopf and Loctite, said a strong performance in emerging markets such as Turkey, Russia, the United Arab Emirates, China and India more than made up for flat sales in Europe.
Anglo-Dutch rival Unilever has also recently said it is benefitting from strong sales of its haircare products and soaps in emerging markets.
Henkel’s share of sales from emerging markets rose to 43% from 42% the previous year, it said yesterday.
Adjusted earnings per preferred share, which the group is increasingly using as a measure of profit, would rise 10% in 2013, the group said, after growing 18% to €3.70 ($4.82) in 2012. It predicted sales growth of between 3 and 5% this year.
The group also reported fourth-quarter sales of €4bn and adjusted earnings before interest and tax (EBIT) of 544mn, in line with expectations, giving full-year totals of €16.5bn and €2.33bn.
It said it would increase its dividend to €0.95 per preferred share, compared with a forecast 0.91.
Having spent years reducing its debt following its €3.7bn buy of National Starch in 2008, Henkel is back on the acquisition trail. It bought several Polish home-care brands from rival PZ Cussons for £46.6mn ($70mn) last month and said in November takeovers would be a key part of plans to increase sales to €20bn by 2016.
Admiral
British motor insurer Admiral Group Plc reported a higher-than-expected 15% profit increase, helped by a turnaround at its Confused.com price comparison website.
Admiral, which insures one in 10 cars on Britain’s roads, made a pretax profit of £344.6mn ($521mn) in 2012, it said yesterday, ahead of the 331.2mn expected by analysts in a company poll.
The improvement partly reflected a rebound at Confused.com, where profit rose 2% to 18mn pounds, the first increase in four years, as the website brokered more sales of financial products other than car insurance.
Admiral also benefited from the release of £17.6mn of cash reserves it set aside in previous years against claims that did not materialise.
Admiral Finance Director Kevin Chidwick said the company did not expect to be seriously affected by forthcoming regulatory changes to the British motor insurance market.
“We’d say Admiral are pretty agnostic about the changes that are going on, because they’re changes that are going to affect the whole industry,” he told reporters on a conference call.
“They’re likely to make a few changes to accounting lines within the numbers and they’re probably going to be generally offsetting each other.”
Admiral earned £32.2mn from personal injury and car hire referral fees last year, it said.
Cardiff-based Admiral, which also trades under the Bell, Diamond and Elephant brands, passes on as much as three quarters of the risks it underwrites to Munich Re and other reinsurers.
The company is paying a total dividend for 2012 of 90.6 pence per share, an increase of 20% and ahead of the 86.7p penciled in by analysts.
Scotiabank
Bank of Nova Scotia capped the Canadian bank earnings season with a better-than-expected 13% profit gain and a dividend hike, helped by higher markets-related income and the acquisition of Canadian online lender ING Direct.
The result, which pushed its shares to an all-time high, ended an earnings period that saw all of Canada’s five biggest banks exceed earnings estimates and all but one raise dividends, as each were able to find ways to boost profit in spite a slowdown in their key consumer lending businesses.
In Scotiabank’s case, its numbers were padded by the C$3.1bn ($3.01bn) acquisition of the Canadian online bank of Dutch lender ING Groep, which boosted loans and deposits, although its lower-rate mortgages weighed on the bank’s loan margins.
“The ING numbers kind of cloud the trends a little bit, but if you take those numbers out, you get still-solid progression. The margins hung in well, the loan growth numbers are OK,” said CIBC World Markets analyst Robert Sedran.
Net profit was C$1.63bn, or C$1.25 a share, in the fiscal first quarter ended Jan 31. That compared with a year-before profit of C$1.44bn, or C$1.20 a share.
Excluding certain items, Scotiabank earned C$1.27 a share, up from C$1.22 a year before, and just beating the $1.25 a share expected by analysts, according to Thomson Reuters I/B/E/S.
The addition of ING direct, along with organic asset growth and lower credit losses, pushed income from the Canadian banking up 21% to C$574mn.
“(Loan-loss) provisions were lighter than forecast, consistent with the other banks this quarter,” John Aiken, an analysts at Barclays Capital, said in a note.
Acquisitions also contributed to Scotiabank’s international operations, as the $1bn acquisition of a 51% stake in Colombia’s Banco Colpatria, which closed early last year, helped push international banking income up 12% to C$416mn.
Scotiabank, Canada’s third-largest bank, operates in more than 50 countries, with the heaviest weighting in Latin America and a growing presence in Asia.
Profit at its global banking and markets division, which includes trading, investment banking and advisory fees, rose 28% to C$399mn.
Wealth managed income rose 7% to C$301mn, helped by stronger markets..
As expected, Scotiabank raised its quarterly dividend by 5% to 60 Canadian cents a share, following the lead of Bank of Montreal, Royal Bank of Canada and Toronto-Dominion Bank last week.
Return on equity was 16.6%, down from 19.8% a year earlier.
While some analysts have suggested Canadian banks may bleed investors to US banks that appear to be poised to benefit from a sharp rebound in the US housing market, David Baskin, president of Toronto-based Baskin Financial, said there was little reason to turn away from the Canadian lenders.
“You’re getting (good) returns on equity. You’re getting a dividend of almost 4%, when five-year Canada bonds are under 2%,” he said. “What’s not to like?”
Cape
Cape, a provider of painting and insulation services to miners and LNG producers, reported a 66% fall in full-year pretax profit, citing poor performances by its Australian business and slow progress at the Arzew gas project in Algeria.
The company said adjusted profit before tax fell to £23.8mn ($36mn) from £69.4mn a year earlier.
Adjusted revenue from continuing operations rose 7% to £749.4mn, driven by construction projects in the Middle East.
Cape warned on its profits in November, noting issues at the Arzew LNG project and worsening margins in its Australian business.
Shares of the company, which has a market value of £282mn, closed at 233 pence on the London Stock Exchange on Tuesday.
Kloeckner
German steel distributor Kloeckner & Co reported a net loss for 2012 and said its new shareholder Albert Knauf backed management’s strategy of US expansion and restructuring in Europe.
Germanbnaire Albert Knauf’s company Interfer Holding GmbH, which took a 7.8% stake in Kloeckner last month, confirmed its strategic and long-term interest in the company in a “constructive” meeting on Friday, Kloeckner said yesterday.
Knauf’s investment in Kloeckner had been unexpected and prompted speculation he might be planning a full takeover bid for the company, which now has a market value of about €1.1bn ($1.43bn).
Kloeckner said it had not discussed any link-up with Interfer in its meeting on Friday and said no further meetings had been scheduled.
Kloeckner slumped to a €195mn net loss in 2012 from a €12mn year-earlier profit, missing analyst consensus for a €140mn loss in a Reuters poll. It will pay no dividend for a second year in a row.
The steel sector has been hit by a fall in demand for cars, appliances and new buildings. And a slowdown by the global manufacturing sector to a modest pace has cemented fears that a recovery could be months away.
Kloeckner responded to the downturn by announcing plans to withdraw from eastern Europe, close and sell branches and slash about 16% of its workforce.
The company, which warehouses and distributes steel products, also buys metal from mills and processes it for smaller customers, mainly in construction and machinery sectors.
L&G
British life insurer Legal & General unveiled a bigger-than-expected dividend after strong annuity sales helped drive annual profit that narrowly beat analysts’ forecasts.
L&G, Britain’s fourth-biggest insurer by market value, made a 2012 operating profit of £1.09bn ($1.6bn), it said yesterday.
That was up 3.2% on the previous year and above the average analyst forecast of £1.08bn in a company poll.
The improvement was driven in part by strong sales of individual annuities, investment products that offer retirees a regular income until death, which rose 26% to £132mn.
L&G hopes to offset weak economic growth in Britain by cashing in on growing demand for annuities and other pension products as the “baby boomer” generation approaches retirement age.
The 177-year old insurer also aims to benefit from higher levels of saving and investment by consumers as Britain’s cash-strapped government cuts its welfare budget to shore up the public finances.
L&G is paying a total dividend of 7.65 pence per share, up 20% on the previous year, and ahead of the 7.49p penciled in by analysts.
James Fisher
Marine engineering services provider James Fisher and Sons reported an 18% increase in full-year profit and said it bought a manufacturer of subsea and diving equipment to boost its business in the booming offshore oil sector.
The company, which provides ship-to-ship transfer services, said it bought Divex for £20mn ($30mn) in cash plus as much as 13mn pounds linked to profit targets.
James Fisher said in December that it sold its railway engineering business to Hitachi Europe for £25.5mn. It said it expected to use the proceeds to reduce debt and fund potential bolt-on acquisitions in its marine services division.
James Fisher reported a full-year profit of £35.4mn on an underlying basis, up from 30.0mn a year earlier.
Profit in the company’s offshore oil business rose 34%.
Revenue rose 18% to £363.3mn.
The company raised its final dividend by 10% to 11.83 pence per share.
The company, based in Barrow-in-Furness, Cumbria, said trading so far this year has met expectations.