- Earnings per share up 5.5% to €1.73
- Net debt reduced to €11.6 billion
- Moody's raises outlook for A1 rating to "stable"
RWE entered the new fiscal year 2005 as a fully focused energy and water company. Germany’s largest power producer further improved its performance in the first quarter: The organic operating result - i.e. the operating result net of consolidation and currency effects - rose, as did net income. Earnings per share increased by 5.5% to Euro 1.73. RWE maintains its forecast for the current fiscal year.
Organic operating result significantly up year-on-year
Net of consolidation and currency effects, RWE posted growth of 7% for the operating result, which was primarily driven by the Continental European energy business. Substantial one-off effects stemmed from the sale of Heidelberger Druckmaschinen and RWE Umwelt. Including these effects, the operating result amounted to Euro 1,950 million, slightly below the level achieved in the first quarter last year.
EBITDA posts 3% organic growth
Excluding consolidation and currency effects, EBITDA rose by 3%. Including these special effects, EBITDA declined by 7% to Euro 2,427 million. The key factor for the operating result outperforming EBITDA was a decrease in depreciation due to the deconsolidation of asset-intensive activities as well as higher income from investments.
Net income rises by 5%
In the first quarter of 2005, RWE increased net income by 5% to Euro 975 million. This was driven by an improved financial result, which was due to debt reduction and a decline in provisions owing to deconsolidations. A decrease in the tax rate to 29% (Q1 2004: 34%) related to one-off effects also contributed to this. However, the tax rate for the full fiscal year will be higher than that of the first quarter of 2005, but below the rate for the previous fiscal year (39%). The non-operating result was down on the high level achieved in the same period last year in part due to the decrease in capital gains.
Revenue posts 8% organic growth
RWE increased its external revenue by 8%, net of all major one-off effects and currency exchange fluctuations. Unadjusted external revenue totalled Euro 11 billion.
Free cash flow improves significantly
In the first quarter, cash flow from operating activities increased by 21% to Euro 1,549 million despite the deconsolidation of Heidelberger Druckmaschinen. Free cash flow - i.e. cash flow from operating activities minus capital expenditure on property, plant and equipment - amounted to Euro 917 million, surpassing the figure achieved a year ago by Euro 346 million.
Net debt reduced to €11.6 billion despite negative currency effects
As compared with the end of fiscal 2004, RWE reduced net debt by another Euro 810 million to Euro 11.6 billion as of 31 March 2005. This was primarily due to the company's high free cash flow. Contributors also were an increase in the value of marketable securities and proceeds from divestments.
Moody's improves RWE credit rating outlook
In April, the rating agency Moody's raised the outlook of the A1 credit rating for RWE from "negative" to "stable." This was due to the strong reduction in net debt over the past two years. Additionally, the rapid implementation of the company's strategy of focussing on core activities and the successful integration of acquired companies into the RWE Group drew positive evaluations. According to Moody's, RWE benefits from the positive environment in the power generation market.
Work force remains stable in core business
Net of divestments, the number of employees has slightly increased by 257 across the Group since the beginning of the year. As of 31 March 2005, the RWE Group employed 86,817 people. Owing to divestments, the Group's work force decreased by 11% compared with the end of 2004.
Outlook for 2005
RWE confirms its 2005 earnings forecast. Excluding one-off effects stemming from divestments and currency effects, the operating result is expected to post a single-digit growth rate. Burdens on earnings are likely to stem from higher fuel costs, an insufficient allotment of CO2 allowances, and the onset of regulation in the German energy market. This will be contrasted by positive developments in the Continental European energy business and the UK water business. RWE expects net income to post a single-digit growth rate.
Furthermore, RWE plans to increase capital expenditure on property, plant and equipment in the current year. According to company management, spending will focus on measures to modernize power plants and grids in Germany as well as in the UK water business. Capital expenditure is expected to total approximately Euro 4 billion.
This press release contains forward-looking statements regarding the future development of the RWE Group and its companies. These statements are assessments that we made based on information available to us at the time this document was prepared. In the event that the underlying assumptions do not materialize or additional risks arise, actual performance can deviate from the performance expected at present. Therefore, we cannot assume responsibility for the correctness of these statements.