- Positive cash flow trend
- Net financial debt down
Persistently low prices on the wholesale electricity market and the unusually mild weather continue to affect RWE AG’s business performance in 2014. In the first three quarters, the operating result fell as expected to EUR2.9 billion, a drop of 31% year on year. EBITDA was down 22% to EUR4.7 billion, and recurrent net income – the basis for determining the dividend – fell 60% to EUR763 million. However, the severity of these decreases is partly attributable to a high one-off payment awarded to RWE during the previous year as a result of a proceeding to renegotiate prices for its gas purchasing agreements, and partly to the fact that recurrent net income no longer includes the result from RWE Dea as it is in the process of being sold. Group revenue fell 9% to EUR35.3 billion.
Since these developments are in line with expectations, the Group’s outlook for the full year remains unchanged. RWE expects to achieve its outlook for EBITDA, operating result and recurrent net income as most recently confirmed in August.
“Despite the decline in earnings, there were more bright than dark spots in the first three quarters,” was how Peter Terium, CEO of RWE AG, summarised the situation. This included, in particular, the positive development in cash flow and free cash flow. The high level of cash inflows enabled RWE to reduce its net financial debt by EUR2.3 billion.
In addition, RWE successfully obtained pre-qualification for all of its power stations in the UK that are eligible to be considered for the new UK capacity market. From winter 2018, power stations there will receive compensation for keeping secured generation capacity available for the market.
Electricity and gas sales in first three quarters of 2014
In the first nine months of the year, RWE sold 192 billion kilowatt hours (kWh) of electricity to external customers, 4% less than in the same period last year. Sales in the residential and commercial customers segment were down, mainly due to weather conditions. Furthermore, the sale of a UK supply subsidiary and the general trend toward saving energy were also reflected in the reduced sales. Among its industrial and corporate customers, RWE benefited from successful acquisitions and increased demand for electricity by several existing customers.
As experience has shown, gas sales are much more weather-dependent than electricity sales. Gas sales fell by 19% to 185 billion kWh.
Capital expenditure down 10% on previous year
As the new-build power plant programme draws to a close, capital expenditure on property, plant and equipment and intangible assets in the first three quarters of 2014 amounted to EUR2.2 billion, or about EUR0.3 billion less than in the same period last year. Overall, RWE’s investments totalled EUR2.3 billion.
Reduction in net financial debt
In particular, the high free cash flow, i.e. cash flow from operating activities less capital expenditure on property, plant and equipment, at EUR2.6 billion, helped reduce the Group’s net financial debt to EUR8 billion. This was offset however by an increase in provisions for pensions, which meant that net debt remained largely unchanged, at EUR30.7 billion.
The Group’s headcount decreased once again, by 7% since the end of 2013. At the end of the quarter, RWE employed 60,439 staff (expressed as full-time equivalent positions); RWE Dea is not included in this total.
Outlook for 2014
From today’s perspective, the forecast earnings outlook for 2014 remains unchanged: EBITDA is expected to range between EUR6.4 and EUR6.8 billion, operating result between EUR3.9 and EUR4.3 billion and recurrent net income between EUR1.2 and EUR1.4 billion. External revenue will be in the order of EUR50 billion.
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 RWE has made based on information available to the company at the time this document was prepared. In the event that the underlying assumptions do not materialise or additional risks arise, actual performance can deviate from the performance expected at present. Therefore, RWE cannot assume responsibility for the accuracy of these statements.
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