Essen, 13 November 2003
Q1–Q3 Group operating result up 25% year-on-year
- Core businesses post 33% growth in operating result
- Net debt reduced to Euro 18.8 billion
- Net income down 19% due to acquisitions
RWE's key figures for the first three quarters of fiscal year 2003 confirm the multi-utility group's forecast of a steeper climb in the Group operating result for the year as a whole, driven by growth in its core businesses. By implementing its new Group structure on October 1, the Group set a decisive course for generating further added value in its core business areas.
Double-digit rise in operating result
The Group's operating result for the first three quarters was up 24.6% to approximately Euro 4 billion year on year. This increase was primarily driven by the strong performance of its core businesses, which showed a 32.8% improvement. Acquired companies made a major contribution to this development, with Innogy contributing Euro 524 million and the Czech gas activities and American Water adding Euro 268 million and Euro 305 million, respectively. Net of consolidation effects, core businesses improved their operating result by 9.0%. This performance was driven the company's electricity and gas activities. RWE's non-core business closed the reporting period with an operating loss of Euro 95 million due to cyclical conditions. This was principally due to negative results at the Heidelberg Group, whose operating result drop from Euro 271 million to - Euro 101 million. Net of significant consolidation effects, the Group's operating result was on par with that of the previous year. Without negative currency effects of some Euro 140 million, RWE would have increased its operating result over the year-earlier level, even net of consolidation effects.
EBITDA climbs 21%
EBITDA jumped 21.0% to about Euro 6.2 billion. Core businesses recorded a 26.2% improvement. EBITDA generated by non-core business slipped to a fifth of last year’s corresponding figure. Net of consolidation effects from the aforementioned acquisitions, EBITDA matched the year-earlier level.
Net income reflects strong external growth
At Euro 1,459 million, net income before goodwill amortization was slightly up year-on-year. After goodwill amortization, net income declined by 19.2% to Euro 732 million. This reflects planned expenditures on the Group's strong external growth, reflected in higher goodwill amortization and an increase in the interest costs. Euro 250 million in one-off costs incurred to reorganize the Group also had an impact. Net income generated in the year-earlier period was exceptionally high, owing to considerably higher proceeds on divestments and a lower effective tax rate. Earnings per share were Euro 2.59 excluding goodwill amortization and Euro 1.30 including goodwill amortization.
Core businesses post significant rise in revenue
External revenue generated by the RWE Group was 9.7% down year on year to Euro 31.9 billion. Core businesses posted 20.1% growth. In non-core business, external revenue dropped to Euro 2.7 billion, which represents about a fourth of the figure achieved for the first three quarters of 2002. This was largely a result of the sale of the service-station and refinery business as of July 1, 2002. In the previous year's corresponding period, these activities contributed Euro 7.7 billion to the Group's revenue on a six-month basis. Net of all consolidation effects, Group revenue decreased by 2.5%. Heidelberger Druckmaschinen's poor revenue trend adversely affected this figure. The decline in consolidated revenue is also due to currency exchange effects.
Cost-savings goal: 85% realized
The Group's cost-savings program aims to achieve Euro 300 million per annum in cost savings during fiscal 2003. RWE realized some Euro 230 million of this goal in the first three quarters alone. Initiated at the end of 2000, the program aims to achieve annual cost savings of Euro 2.56 billion by the end of 2004. This figure does not yet include the Euro 300 million per annum in savings resulting from the Group's new structure, implemented Oct. 1. As of Sept. 30, 2003, RWE had achieved over 85% (about Euro 2.2 billion) of its cost-savings goal.
Net debt reduction goal clearly exceeded
As of Sept. 30, 2003, net financial debt was Euro 18.8 billion. RWE has thus clearly exceeded its goal of reducing net financial liabilities to less than Euro 24 billion by the end of 2003. High cash flows from operating activities and proceeds from the divestment of the refinery and service-station business of Euro 1.5 billion had a positive effect. Additional divestments and the deconsolidation of CONSOL Energy reduced net debt by another Euro 1.9 billion. The weak dollar and pound caused debt to decline by Euro 1.5 billion.
At about Euro 4 billion, cash flows from operating activities in the first three quarters of 2003 were just slightly down on the year-earlier level. However, the figure for the first nine months of 2002 included a positive one-off effect of Euro 487 million in current assets from the deconsolidation of the refinery and service-station business. Free cash flow, which is defined as cash flows from operating activities less capital expenditure on property, plant and equipment and intangible assets, was down some 25.9% to Euro 1 billion. This was due to the fact that capital expenditure on property, plant and equipment was higher as a result of consolidation effects.
Capital expenditure down 45% year-on-year
Capital spending declined by 45.4% to Euro 8.1 billion in the first three quarters. The year-earlier figure was exceptionally high due to the acquisition of the Czech gas activities and Innogy. Capital expenditure on financial assets totaled Euro 5.2 billion, and almost exclusively financed the acquisition of American Water.
As of September 30, 2003, the RWE Group employed 136,858 people (full time equivalent), 74,102, or 54.2%, of whom worked in Germany. RWE's workforce thus expanded by 5,093 employees, or 3.9%, due to acquisitions since December 31, 2002. Excluding consolidation effects, the Group's employee headcount declined by 1.8%.
The operating result is expected to post further growth in fiscal 2003. RWE estimates its operating result to rise by at least 15%, with core businesses recording an increase of about 20%. Major contributors are the first-time consolidation of American Water and the first-time, full-year inclusion of Innogy and the Czech gas activities. This rise is due to the positive earnings situation in our electricity and gas businesses. Core businesses would close the fiscal year with a much better performance without negative currency effects. However, currency exchange effects will be almost entirely absorbed by the non-operating and financial results. Therefore, they will only have a slight impact on net income.
Net income reflects the impact of RWE's major acquisitions on the interest cost and goodwill amortization. Nevertheless, after goodwill amortization, net income is expected to decline by no more than 20% compared with the previous year (Euro 1,050 million). The previous forecast had envisioned a decrease of 25% to 30%. Without goodwill amortization, net income is expected to be slightly up year-on-year (2002: Euro 1,830 million). Net financial debt will probably have fallen below €20 billion by the end of 2003. Therefore, RWE will clearly exceed its debt-reduction target for 2003 (Euro 24 billion).
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