ESSEN (dpa-AFX) - The energy group Eon performed better than expected last year. The Essen-based company owed this not least to higher revenues from nuclear power in the energy crisis. In early trading on Wednesday morning, the share showed itself strengthened. Analysts were generally positive about the results, but some observers felt that it was the non-core business that fed the surprisingly strong results.

Shortly after the stock market opened, Eon shares recently rose by more than two percent to 9.97 euros, thus approaching the 10-euro mark again, below which they had recently slipped. 2023, Eon shares have performed well so far, but with a gain of almost seven percent since the turn of the year, they are lagging somewhat behind the Dax. Already since the multi-year low of 7.28 euros reached last October, the stock has been on the upswing again.

Goldman analyst Alberto Gandolfi spoke of strong figures that exceeded consensus estimates. A trader said the shares should initially benefit from the solid figures. However, Eon owes the positive surprise primarily to the non-core business, this is therefore also only temporary in nature. In the further course of the day, the stockbroker therefore considers profit-taking possible.

According to the analysis of Ahmed Farman, Eon benefited primarily from the weather, as well as from lower depreciation in the non-core business. The fact that the market expectations were exceeded in net profit, was only to a lesser extent operational and was mainly due to special effects, wrote the Jefferies expert. Alexander Wheeler of Canadian bank RBC also highlighted the strength of the non-core business. In his opinion, however, Eon was apparently also able to cope well with the headwinds in the network business - which is part of the core business.

According to preliminary calculations, Eon is forecasting adjusted earnings before interest, taxes, depreciation and amortization (adjusted Ebitda) of around eight billion euros for the Group as a whole. The management around Group CEO Leonard Birnbaum had recently expected 200 million euros less, even in the most optimistic scenario. Adjusted net income is also expected to exceed the upper end of the management forecast at 2.7 billion euros.

The individual segments will only be at the upper end of the forecast ranges updated in November, as Eon surprisingly announced in Essen on Tuesday evening after the close of the stock exchange. Summed up for the entire Group, however, the forecast for the operating profit will then be exceeded. Analysts also had less on their minds.

Compared with the estimates collected by the news agency Bloomberg, Eon 2022 did better in terms of operating profit by 250 million euros than the experts had expected. According to Jefferies expert Farman, the core business contributed 140 million euros. Here, the weather and higher sales volumes would have had a positive effect. According to him, the remaining 90 million euros came from the reversal of provisions. He is referring to discussions with Eon.

Eon divides its business into two segments: The so-called core business accounts for the majority. This includes, on the one hand, the operation of distribution networks. According to the forecast, operating profit here should contribute €5.5 billion in the best case. Secondly, the core business includes energy sales, which should contribute a maximum of 1.7 billion euros to earnings. In both cases, the key figures would be better than in the previous year.

However, the Group had dampened its targets for the network business in November. At that time, Eon was struggling on the one hand with the warm weather, as less electricity and gas was routed through the networks. At the same time, higher energy costs weighed on results. This is because operators are obliged to supply their distribution grids with a certain basic voltage - for which expensive electricity is also purchased on the market.

In the so-called non-core business, the Essen-based company bundles both the operation of the Isar 2 nuclear power plant in Lower Bavaria, which is run by Eon's subsidiary Preussenelektra, and the dismantling of the other former nuclear power plants and the generation business in Turkey. According to management's expectations, the contribution to operating profit should amount to a maximum of €1.1 billion, which would be half a billion less than in 2021. Eon had raised these targets again two months ago. This was justified by the expected additional production due to the longer operation (stretch operation) of nuclear power plants decided by the German government. Eon plans to present the final results on March 15./tav/lew/mne/tih

Adhoc: https://www.eon.com/de/ueber-uns/presse/pressemitteilungen/2023/ad-hoc-meldung-veroeffentlichung-einer-insiderinformation-nach-art-17-mar.html

From the text on the revised forecast on November 9: (Archive: 192.168.60.36:8080/cockpit-2.0/archive/showArchivedNews?archiveRowId=9437&wireName=aftd&tableName=A_2022_11)

In the network business, Eon management now expects adjusted operating profit of only €5.3 billion to €5.5 billion in 2022. The beginning and end of the range are thus 200 million euros lower than previously. Before the figures were presented, analysts estimated the segment's full-year operating profit at just under €5.5 billion on average. Group CEO Leonhard Birnbaum had already noted in August that the network business could end up at the lower end of the previous range.

The combination of high costs from network losses and the milder weather led to a charge in the low three-digit million range in the year to date, CFO Marc Spieker said in a conference call with analysts. Grid losses occur because grid operators are obliged to supply energy grids with a certain base voltage. For this purpose, electricity is also purchased on the market. This is still very expensive, which depresses Eon's earnings. However, according to Spieker, both effects are fully recovered in subsequent years under the established regulatory mechanism. Thus, they are "economically neutral," he explained.

At the same time, management increased the beginning and end of the range for non-core business by €100 million each: Here, adjusted operating profit is expected to be between 0.9 and 1.1 billion euros. Drivers are the high energy prices and the additional production expected by Eon as a result of the stretch operation of nuclear power plants decided by the German government. Analysts expected an average of 857 million euros for the business area, in which Eon also bundles the dismantling of nuclear power plants and the generation business in Turkey.