E.ON grew Q1 sales by 37% year-on-year to E21.5 billion and grew pre-tax earnings by 6% to E2.5 billion. Net income also surpassed the high prior-year figure, advancing by 18% to E1.7 billion, the firm said in a statement.
The central Europe market unit increased adjusted EBIT by 10% to E1.4 billion. The advance is primarily attributable to the inclusion of newly consolidated subsidiaries in Bulgaria and Romania, temperature-driven increases in natural gas sales volumes, and higher average prices for electricity and natural gas in the wake of the global increase in raw materials and energy prices.
The pan-European gas arm grew adjusted EBIT by 57% to E733 million (E467 million). Contributing to the increase were higher sales volumes caused by colder winter weather, consolidation effects, and an improved upstream business. Pan-European gas’ first-quarter results were adversely affected by the increase in light heating oil prices, since procurement prices respond to changes in light heating oil prices faster than sales prices. However, this effect was less pronounced than in the prior-year period.
The UK unit’s adjusted EBIT fell by 86% to E38 million (E268 million). Natural gas supply issues and cold weather led to considerably higher natural gas procurement costs in the United Kingdom. Nordic’s adjusted EBIT rose by 5% from E287 million to E300 million, in part due higher spot electricity prices. US Midwest’s adjusted EBIT declined by 8% from E100 million to E92 million. Higher costs associated with new market regulations in the transmission business constituted the main factor.
E.ON continues to expect its adjusted EBIT for 2006 to slightly surpass the high prior-year level. However, the company says it will not repeat the extraordinarily high net income figure posted in 2005, which resulted in particular from the book gains on its successful Viterra and Ruhrgas Industries disposals.
E.ON CEO Wulf Bernotat said: Our first-quarter earnings development confirms again that we were right to focus on our core power and gas business. Now a top priority is to achieve value-enhancing growth in our core business.
By acquiring Endesa, a Spanish energy utility, E.ON aims to tap attractive growth markets in southern Europe and South America. In late April 2006, the European Commission issued an unconditional antitrust approval for E.ON’s acquisition of Endesa. The national approvals process conducted by the CNE, Spain’s energy regulator, is currently under way, the firm says without offering further details on the high-profile wrangle.
In addition, E.ON says it is still negotiating with Gazprom about acquiring a stake in Yushno Russkoye gas field in order to strengthen its position in natural gas procurement.