German utility E.On's profit sank in the first quarter due to network fees and procurement costs. The firm's boss said guidance for the year is maintained, although he admitted it was "ambitious".
E.On's adjusted net income dropped 20 per cent to €525m (£443m) from €658m for the three months to the end of March. Adjusted earnings before interest and tax (Ebit) fell 34 per cent to €1.04bn.
Profit at its UK retail business dropped 43 per cent to €161m as the firm works to win customers in Britain's challenging market.
At 31 March, the company's debt pile stood at €24.75bn, six per cent lower than at the end of December. Its workforce declined by one per cent from the end of 2016 when it said it would slash its headcount by three per cent to cut debt.
Shares lifted 1.83 per cent to €7.22 in morning trading.
Why it's interesting
Chief executive Dr Johannes Teyssen said the company's 2016 annual report enabled the company to wipe the slate clean from an accounting perspective and "put the past behind us".
The firm posted its biggest loss ever in 2016 mainly due to major impairments on conventional power plants held by Uniper, a company E.On spun off. Now, E.On said it is fully focused on its core business: energy networks, customer solutions and renewables.
Earnings in the first quarter fell due to higher network fees and procurement costs for power and gas in Germany and the UK as well as one of its nuclear power stations going offline for longer than expected. However, Teyssen said those impacts will be offset over the course of the year.
What E.On said
Teyssen said first quarter earnings were expected to be below the previous year's, and they are in line with guidance.
"In our core business, energy networks’ earnings performance was very good, while renewables’ performance was stable, as anticipated," he added.
"The earnings decline was primarily at customer solutions’ sales business. It resulted from the fact that higher procurement costs for power and gas from upstream suppliers in the United Kingdom, Germany, and Romania as well as higher network fees in Germany can only be passed on to our customers with a delay. In our non-core business, Brokdorf power station was offline longer than originally planned after an overhaul."
These extraordinary factors in particular had an adverse impact on our first-quarter earnings but will largely be offset during the course of the year. At the conclusion of the first quarter we therefore affirm our forecast. We expect to post adjusted Ebit of €2.8bn to €3.1bn and adjusted net income of €1.2bn to €1.45bn in the current financial year and to maintain this level for the subsequent three years.