• Operating result shows 9% organic growth
• Work force increases net of one-off effects
• Net financial debt reduced to under €11 billion
• Positive earnings forecast confirmed for the year
The positive trend in RWE AG’s energy and water business continued in the first nine months of 2005. Both the operating result and net income rose again year-on-year. Earnings per share increased by approximately 6%. At the same time, the Company was able to reduce its net financial debt to below €11 billion. RWE maintains its earnings forecast for the current fiscal year.
Operating result shows 9% organic growth
RWE further improved the Group’s earnings. Net of non-operating effects—i.e. excluding consolidation and currency effects—the operating result rose by 9% year-on-year. Even including all one-off effects, RWE increased the Group’s operating result by 4% to
€4,656 million. The Company benefited primarily from the stable earning power of its Continental European energy business.
EBITDA posts 6% organic growth year-on-year
Excluding non-operating effects, EBITDA rose by 6%. Including all one-off effects, EBITDA was €6,147 million, only slightly below the year-earlier level.
Net income improves by 5%
Net income rose by 5% to €1,697 million, reflecting RWE’s positive operating performance. Countervailing effects in the non-operating result and the financial result offset each other. Earnings per share increased from €2.86 to €3.02.
Revenue shows 11% organic growth
In the first three quarters of 2005, the RWE Group generated €29.4 billion in external revenue.
A 2% decline from the prior-year figure results from deconsolidations. Net of one-off effects, external revenue was 11% higher.
Cash flow significantly up year-on-year
In the first nine months, cash flow from operating activities rose by 16% to €4,394 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, was also significantly up year-on-year at €2,226 million. In addition to improved cash flow from operating activities, another factor was slightly lower capital expenditure on property, plant and equipment. However, the current increase in free cash flow cannot be extrapolated to the full-year result since substantial investments will be made in the fourth quarter.
Net debt declines to €10.8 billion
RWE reduced its net financial debt from €12.4 billion at the end of fiscal 2004 to €10.8 billion at the end of September 2005. This was primarily due to the high level of free cash flow. Dividend payouts and currency exchange fluctuations had an opposite effect.
Cost-reduction programmes deliver €140 million in savings
RWE plans to reduce annual costs by €680 million by the end of 2006 through two ongoing cost-reduction programmes. Together, the two programmes achieved €140 million in savings in the first three quarters of 2005, 67% of the targeted cost reductions for the year.
Capital expenditure on property, plant and equipment
Capital expenditure on property, plant and equipment decreased by 2% to approximately
€2.2 billion. Net of all non-operating effects, capital expediture on property, plant and equipment rose by 5%. RWE Power accounted for the lion’s share of this expenditure. The most significant investment projects are the construction of two topping gas turbines to boost the efficiency of the lignite-fired power plant at Weisweiler and measures by RWE Dea to develop the Mittelplate oil field in the North Sea.
RWE plans to increase capital expenditure on property, plant and equipment to up to €4 billion for the current fiscal year. Spending will focus on measures to modernize power plants in Germany and the UK.
Work force slightly up across the Group net of one-off effects
As of 30 September 2005, the RWE Group employed 86,420 people, just under half of them outside Germany. Net of consolidation effects, the workforce expanded by 790 employees compared with the end of 2004. Net of one-off effects, the Group’s headcount in Germany was nearly unchanged.
Outlook for 2005
RWE confirms its positive earnings forecast for 2005. Excluding one-off and currency effects, RWE expects to post single-digit growth in the operating result year-on-year. The anticipated increase is mainly due to Continental European energy business. Tariff increases in the regulated UK and US water businesses constitute another positive factor. In addition, RWE plans to achieve savings totalling €210 million under its two ongoing cost-reduction programmes. By contrast, burdens on earnings will result from higher costs for fuel and power-plant maintenance, as well as an insufficient allotment of CO2 allowances. RWE also expects the Group to post a single-digit percent rise in net income.