E.ON fully on track after strong first quarter of 2021
- Adjusted EBIT up 14 percent to €1.7 billion, adjusted net income up 19 percent to roughly €800 million
- Operating improvements along with weather-related increase in gas sales volume are key earnings drivers
- Successful restructuring enables UK business to return to profitability
- Forecast for 2021 financial year, medium-term targets, and dividend policy confirmed
Essen-based energy company E.ON continues its successful performance in the new financial year despite the COVID-19 pandemic, posting significantly improved earnings. Adjusted EBIT rose by 14 percent year on year to €1.7 billion, adjusted net income by 19 percent to €809 million. At the presentation of the company's first-quarter results, CFO Marc Spieker commented: "We're off to a successful start in the new year. All our businesses delivered a strong operational performance in the first quarter. This gives us a lot of confidence for the remainder of the year. I can therefore fully affirm our forecast for 2021, our medium-term financial and earnings plan, and our dividend promise."
Earnings driven by operating improvements at Customer Solutions business
Group adjusted EBIT increased significantly-by about €200 million-year on year to €1.7 billion, primarily because of the Customers Solutions business.
Earnings at the Customer Solutions segment improved by just under €300 million relative to the prior-year period and thus almost doubled. A weather-related increase in gas sales volume and successful restructuring in the United Kingdom were key factors. In the United Kingdom, all npower customers have been migrated to the new digital customer platform. E.ON is therefore confident that it will already achieve its target of surpassing £100 million in earnings this financial year and thus one year earlier than planned. E.ON originally expected to reach this important milestone in 2022.
Energy Networks' earnings were stable relative to last year. Although compared with the prior year E.ON transported more energy in Germany owing to colder weather, the resulting earnings increase was largely offset by an anticipated increase in expenditures for network expansion and upgrades. E.ON's business in Central-Eastern Europe and Turkey benefited from the initial consolidation of VSE in Slovakia, which was acquired in the third quarter of last year.
First-quarter earnings at Non-Core Business, which consists of PreussenElektra and the generation business in Turkey, were down by roughly €80 million year on year. The decline is due in part to the acquisition of additional residual power output rights for nuclear power stations. Another factor was that earnings at E.ON's generation joint venture in Turkey were negatively affected by a reduction in hydropower output and adverse currency-translation effects.
Adjusted net income amounted to €809 million in the first three months of 2021, up 19 percent from 2020. The gain reflects the increase in operating earnings.
Debt reduction making swifter progress
Marc Spieker: "Backed by our strong first-quarter performance and assuming interest rates remain at current levels, we're right on course to already achieve our target debt factor of 4.8 to 5.2 this year and thus earlier than originally planned."
Economic net debt of roughly €40.8 billion as of March 31, 2021, was largely unchanged from the 2020 financial year. This was helped by a significant €1.7 billion decline in provisions for pensions relative to year-end 2020 due to an increase in actuarial discount rates.
By contrast, first-quarter operating cash flow was negative due to seasonal factors. In the sales business with residential customers, high energy consumption during the winter led to a negative cash balance in the first quarter, because cash inflow from installment payments is spread evenly over the year. The network business recorded a temporary increase in working capital as well owing to the payment of the renewables feed-in tariff in Germany. These seasonal effects will reverse themselves in the remainder of the year.
After a strong start to the financial year, E.ON expects to achieve all its targets for 2021 and its medium-term earnings plan through 2023, including its dividend promise. Spieker therefore confirmed E.ON's full-year forecast: "We're very confident that we'll achieve our adjusted EBITDA target of €7.2 to €7.5 billion and our adjusted EBIT target of €3.8 to €4 billion for the 2021 financial year."
This press release may contain forward-looking statements based on current assumptions and forecasts made by E.ON Group Management and other information currently available to E.ON. Various known and unknown risks, uncertainties, and other factors could lead to material differences between the actual future results, financial situation, development or performance of the company and the estimates given here. E.ON SE does not intend, and does not assume any liability whatsoever, to update these forward-looking statements or to align them to future events or developments.