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AGL unveils loss after asset write-downs

Nicki Bourlioufas  |  10 Aug 2016Text size  Decrease  Increase  |  

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AGL Energy reports a statutory loss after tax of $408 million due to asset write-downs and changes in the fair value of electricity derivatives, while underlying profit rises 11.3 per cent.


AGL Energy (ASX: AGL) on Wednesday reported a statutory loss after tax of $408 million for the financial year ended 30 June 2016, down on the previous year's $218-million profit and despite revenue rising 4.4 per cent to $11.15 billion.

The statutory loss reflects asset write-downs and changes in the fair value of electricity derivatives, the company said.

On a more positive note, underlying profit, which is adjusted for significant items, was $701 million, up 11.3 per cent.

Moreover, the company reported that its profit per household jumped to $108 up from $86 a year earlier, as the energy and gas retailer cut costs.

AGL declared a final dividend of 36 cents a share, an increase of 2 cents a share. This brings total dividends declared for 2015-16 to 68 cents a share, fully franked, an increase of 4 cents a share or 6 per cent on the prior year's result.

Adrian Atkins, a senior equities analyst with Morningstar, said the result was in line with expectations, though a warmer start to the 2016-17 financial year would weigh on earnings ahead.

"Since 30 June, it has been quite a warm winter, which has resulted in softer sales of energy compared to the same period last year," said Atkins.

"The market was also surprised by the announcement of a new $300-million capital expenditure program, which will result in additional costs, though this may help to reduce operating costs in future years."

AGL flagged some headwinds in terms of its fiscal 2017 result, with more challenging conditions in gas markets. Formal earnings guidance for fiscal 2017 will be provided at the company's annual general meeting on 28 September.

Moreover, "the benefit of stronger wholesale electricity prices will moderate over the medium term, reflecting the prevailing competitive environment, the timing of price changes and AGL's hedging profile," the company said.

AGL' shares fell in early trading on the cautious outlook, as much as 5 per cent to $19.33. They rebounded slightly through the day to $19.80.

"But we still think they are overvalued," said Morningstar's Atkins, adding that AGL shares have had a strong run in the past 12 months due to higher electricity prices and as a result of the company stripping out costs.

AGL managing director and chief executive, Andy Vesey, said the company had delivered a strong underlying profit result which "reflects our focus on operational execution and driving value through margin and cost discipline at the same time as we undertake the transformation of AGL".

The $300-million capital expenditure program would over three years "drive the digital transformation of our customers' experience," Vesey said.

"This is a key component of the delivery of our strategic framework to embrace transformation, drive productivity and unlock growth as the energy sector evolves."

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Nicki Bourlioufas is a Morningstar contributor. This is a financial news article to be used for non-commercial purposes and is not intended to provide financial advice of any kind.

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