EON share price down, income decreases on lower electricity prices and weaker currencies

E.ON SE reported decreased net income for the first nine months due to lower power prices and weaker Russian ruble.

Germanys biggest utility by market capitalization reported underlying net profit of €1.435 billion, a 25% decrease compared with the €1.901 billion a year earlier.

Lower power prices in Germany and across Europe crippled E.ONs performance. Weaker currencies in Russia and Europe also dented the companys results, so did the warmer weather, which kept power demand low.

In line with its rivals RWE AG and EnBW AG, E.ONs results have been hit by an oversupply of electricity in Germany, pushing wholesale prices down and making conventional plants unprofitable.

The government also scaled back production of nuclear power and moved to subsidized cleaner energy. However, the authorities are considering paying utility companies to maintain capacity, but face severe criticism from ministers, who do not wish to spend public money subsidizing surplus capacity.

In the first nine months net income attributable to shareholders took a massive dive from €2.6 billion in the same period a year earlier to a loss of €14 million. However, last years results benefited from asset sales, including the disposal of hydroelectric power stations in Bavaria.

Revenue fell 9%, from last years €89.33 billion to €81.35 billion, including a 14% decrease in gas sales to 754.3 billion kWh and a slight increase of 2% in electricity sales to 547.8 billion kWh.

E.ON has turned its attention to emerging markets outside of Europe, including Brazil, Turkey and Russia, as the company awaits higher growth in energy demand. Under the plan E.ON sold many western European assets, which reduced its profit and revenue in the short term in the existing markets and exposed the company to volatility in the new markets.

“Our nine-month results reflect the continued difficult situation in energy markets in Germany and across Europe, but also the many operating, financial, and strategic measures we’ve initiated” said CEO Johannes Teyssen.

In the period between January 1 and September 30, EBITDA slid 7% to €6.6 billion versus the €7.1 billion of last year. The company restated its forecast for full-year EBITDA to range from €8 billion to €8.6 billion. In 2013 EBITDA stood at €9.3 billion.

E.ON SE fell 3.36% on Wednesday and closed at €13.09 in Frankfurt. On Thursday the stock declined 0.34% to trade at €13.04 at 08:07 GMT, marking a one-year decrease of 5.34%. The company is valued at €27.09 billion. According to the Financial Times, the 28 analysts offering 12-month price targets for E.ON SE have a median target of €14.30, with a high estimate of €19.80 and a low estimate of €12.00. The median estimate represents a 9.29% increase from the last close price of €13.09.