Contact Energy's first-half earnings fell 11 per cent as the electricity generator-retailer dealt with a dry spell, which sapped its hydro generation in what it described as a "highly competitive" market.
Earnings before tax, depreciation, amortisation and changes in the value of financial instruments, a measure in the electricity sector to demonstrate performance shorn of one-off factors, dropped to $236 million in the six months ended Dec. 31 from $264 million a year earlier, the Wellington-based company said. Net profit sank 40 percent to $58 million, or 8.1 cents per share, which it said was due to a greater reliance on thermal power supply. Revenue rose 15 percent to $1.19 billion.
The result was in line with Forsyth Barr analyst Andrew Harvey-Green's forecast for an 11 percent decline in ebitdaf to $236.1 million on a 14 percent increase in revenue to $1.18 billion.
"Wholesale market conditions in the first half of the financial year were book-ended by record low inflows into our Clutha catchment", chief executive Dennis Barnes said in a statement. "Our flexible thermal fuel supply and diverse assets ensured a reliable supply to customers through these dry periods, but the additional fuel and carbon costs incurred adversely impact financial performance."
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Contact lucked out in the period as dry spells in the South Island left its hydro lakes operating below average, while wet weather in the North Island left rivals such as Trustpower and Mercury NZ flush with wholesale electricity prices almost twice what they were a year earlier.
The electricity generator-retailer didn't provide annual earnings guidance, saying "the extent of the dry period remains unknown" and that it will focus on growing operating free cash flow by clamping down on controllable costs. Contact plans to pay 80-to-90 percent of operating cash flow in dividends once it reduces its net debt to ebitdaf ratio. Operating cash flow rose 5 percent to $141 million.
The board declared an interim dividend of 13 cents per share, payable on April 6 with a March 16 record date. That's up from 11 cents a year earlier.
The shares closed at $5.34 on Friday and have gained 11 percent over the past 12 months.