By Nicholas Comfort
May 13 (Bloomberg) -- E.ON AG, Germany’s largest utility, said first-quarter profit fell 2 percent on the global slump in energy prices.
Adjusted net income, which excludes writedowns on assets and hedging derivatives, declined to 1.8 billion euros ($2.5 billion) from 1.84 billion euros in the same period a year earlier. That beat the 1.49 billion-euro median estimate of 11 analysts surveyed by Bloomberg.
The world’s worst recession since 1945 has chopped energy use as manufacturers curb production to counter lower consumer demand. That’s prompted Dusseldorf-based E.ON to cut its growth outlook until 2011 and warn investors that profit before writedowns may decline 10 percent this year.
Crude oil plunged more than $100 from its July record. That cut the value of the natural gas E.ON produces in the North Sea, as tariffs for the fuel are pegged to crude.
Net income rose 18 percent to 2.5 billion euros, reflecting the marking to market of derivatives used to guard against price fluctuations. Sales increased 14 percent.
Colder weather in the quarter as a whole increased consumer demand for heating, Energie Baden-Wuerttemberg AG, Germany’s third-largest utility, said last week.
Arctic conditions gripped Central Europe as temperatures in Germany and Poland plunged below minus 25 degrees Celsius (minus 13 degrees Fahrenheit) in January.
Lower Consumption
Still, a drop in power and gas consumption by industrial clients forced the Karlsruhe, Germany-based E.ON rival to sell electricity at a lower price on the spot market after customers were unable to take the volumes they ordered.
E.ON vice chairman Johannes Teyssen said March 10 that power consumption in “some areas” such as carmakers has fallen by up to 20 percent since the recession in Europe’s largest economy began. He didn’t provide further details or an outlook.
The company uses adjusted net income to calculate its dividend as the profit gauge isn’t affected by volatility. Accounting rules state that net income has to reflect the value of contracts for fuel and power at the end of the quarter, which fluctuate from one day to the next.
To contact the reporter on this story: Nicholas Comfort in Frankfurt at ncomfort1@bloomberg.net
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