- Net income improves by 23% in first three quarters
- Net financial debt further reduced
The RWE Group improved its earnings in the first three quarters of 2006 compared with the year-earlier period. The operating result rose by 15% and net income increased by 23%. Consequently, the Group also expects significant earnings growth for the full year.
Operating result and EBITDA up year on year
RWE increased its operating result by 15% to EUR 5,361 million compared with the equivalent year-earlier period. However, the company expects to post a lower growth rate for the year as a whole. The reasons for this include the expected reduction in revenues resulting from network regulation in Germany and unplanned power plant outages. On balance, consolidation, accounting and currency effects hardly had an impact on earnings. EBITDA rose by 11% to EUR 6,797 million.
Net income improves by 23%
Net income for the RWE Group improved by 23% to EUR 2,092 million. This was driven by the positive operating trend, which was, however, contrasted by additional burdens in the non-operating result. Earnings per share increased from EUR 3.02 to EUR 3.72.
External revenue up 16%
The Group generated EUR 34 billion in external revenue by the end of September. This figure represents a 16% year-on-year increase. Excluding non-operating effects, i.e. net of one-off effects and currency exchange fluctuations, Group revenue increased by 19%. RWE posted gains in all Divisions.
Cash flow up on previous year
During the first three quarters of 2006, RWE generated cash flow from operating activities amounting to EUR 4,882 million. In comparison with 2005, this corresponds to a rise of EUR 488 million, or 11%, and is primarily due to the positive earnings trend. Free cash flow - i.e. cash flow from operating activities minus capital expenditure on property, plant and equipment - decreased by EUR 73 million to EUR 2,153 million. This was due to an increase of EUR 561 million in capital expenditure on property, plant and equipment.
Net financial debt reduced considerably
Despite the EUR 1.2 billion dividend payments, the Group reduced its net financial debt by EUR 2,842 million to EUR 8,596 million compared with the beginning of the year. This was mainly driven by the high level of free cash flow as well as proceeds from divestments and the deconsolidation of financial liabilities. Following the completion of the sale of Thames Water, net financial debt is expected to be eliminated by year-end. The Group anticipates having a positive net financial position in the order of EUR 3 billion.
Cost-reduction goal for 2006 will be achieved
RWE plans to reduce annual costs by EUR 680 million by the end of 2006 through two ongoing programmes. The target volume for the current year is EUR 230 million. EUR 180 million of the total amount have already been achieved in the first three quarters.
Capital expenditure on property, plant and equipment up 26% year on year
RWE invested EUR 2,944 million during the first three quarters, 27% more than in the equivalent year-earlier period. The RWE Group increased capital expenditure on property, plant and equipment by 26% to EUR 2,729 million. The most significant increase was accounted for by RWE Power; the construction of a 2,100 MW lignite-fired power plant with optimised plant technology (BoA) in Neurath deserves particular mention. Capital expenditure in the network business of RWE Energy also played an important role.
Workforce increases by 2% net of one-off effects
As of 30 September 2006, the RWE Group employed 76,391 people, half of whom worked in Germany. Net of one-off effects, staff numbers rose by 1,672, or 2%, compared with 31 December 2005. In Germany, the workforce was up by 329 employees. In net terms, 11,209 employees left the Group as a result of divestitures. This was primarily due to the sale of RWE Solutions AG. In sum, the workforce decreased by 9,537 employees compared with 31 December 2005.
The sale of Thames Water, which RWE intends to close in December, will have a considerable impact on figures for the year as a whole. The income statement will report Thames Water’s income after tax (including the book gain arising from the divestment) as “income from discontinued operations”. Thus, Thames Water will not be included in revenues, EBITDA, operating result, non-operating result, financial result or taxes on income, but it will be included in net income.
The forecast published in February 2006 is still valid for both EBITDA and the operating result. The company expects EBITDA to rise by a single-digit percentage even without Thames Water’s 2005 and 2006 figures. The operating result is likely to post a slightly higher growth rate. RWE still anticipates an increase of 5% to 10%.
According to the company’s earlier expectations, net income was to rise by approximately 10%. Due to the book gain of around EUR 700 million on the sale of Thames Water, net income is now expected to show a much stronger improvement. This will lead to an increase of over 40%.
The RWE Group still sees risks arising from the introduction of German network regulation, since the full impact on earnings and the extent of countermeasures required will not be known until the end of the year.
RWE expects external revenue to increase in the order of 5% to 10% year on year.
This press release contains forward-looking statements regarding the future development of the RWE Group and its companies as well as economic and political developments. These statements are assessments that we have 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 accuracy of these statements.