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Origin Energy scraps dividend after earnings fall on oil price slump

Nicholas Grove  |  18 Aug 2016Text size  Decrease  Increase  |  

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The energy retailer records a 41 per cent fall in underlying fiscal 2016 profit and cancels its final dividend after lower oil prices take their toll.


Origin Energy (ASX: ORG) on Thursday announced an underlying profit from continuing operations of $354 million for fiscal 2016, down 41 per cent on the previous year and below Morningstar's expectations for a profit of $364 million.

Underlying earnings per share (EPS) from total operations fell from 54 cents a share in the previous year to 23.2 cents a share, and was also short of Morningstar's forecast of 25.4 cents.

Underlying earnings before interest, tax, depreciation and amortisation (EBITDA) from continuing operations for fiscal 2016 stood at $1,635 million, down slightly from $1,662 million previously.

The company attributed the result to a strong operational performance from its Energy Markets division, and maiden liquid natural gas production by the Australia Pacific LNG project, being more than offset by lower oil prices.

Including one-off items, Origin recorded a statutory loss from total operations of $589 million.

Origin chairman Gordon Cairns also announced that the company would not be paying a final dividend for fiscal 2016.

"Given the important task of continued debt reduction, and the fact that in the current lower oil price environment the company is not generating franking credits sufficient to frank any dividends, the board has determined to not pay a dividend in respect of earnings for the second half of the financial year," he said in a statement to the ASX.

"While the board will review each dividend decision in light of the prevailing circumstances, the board's view is that suspension of the dividend is in the best overall interest of shareholders."

Origin said it managed to reduce its adjusted net debt by $4 billion to $9.1 billion, and expects adjusted net debt to be well below its target of $9 billion at the end of fiscal 2017.

While fiscal 2016 and fiscal 2017 are "transitional years" for the company as LNG production commences and ramps up to full production, Origin said it expects a 45 to 60 per cent rise in underlying EBITDA from continuing operations in fiscal 2017.

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Nicholas Grove is a Morningstar journalist.

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