E.ON and RWE Blame Energy Turnaround for Weaker Q2 Performance

In view of a first-time loss that E.ON AG had to announce for Q2 2011, the company said it would possibly cut 9,000 to 11,000 jobs to curb costs, citing the energy turnaround as the main reason for the poor results. RWE also said the accelerated nuclear phase-out led to its weaker Q2 performance. Both companies revised their forecasts downward.

While group sales rose by approximately 20 percent year-on-year to roughly EUR53 billion, the Adjusted EBITDA decreased by 45 percent to EUR 4.3 billion. The adjusted net income for the first half of 2011 fell by 71 percent year-on-year to EUR 900 million, resulting in the company’s first quarterly loss in its history (minus EUR 382 million in Q2/2011).

E.ON said its performance was mainly affected by the amendment of the German Nuclear Energy Act with the early unplanned shutdowns of nuclear power plants in Germany and the nuclear-fuel rod tax. Besides, negative earnings from long-term gas procurement agreements and lower revenues from the power trading business also had an impact.

In view of the political interventions and the extremely difficult economic situation, E.ON is forced to significantly reduce the overall earnings expectations for the year of 2011, the company pointed out. Based on the current business situation, E.ON now anticipates Group’s earnings to be reduced to adjusted EBITDA per year-end between EUR 9.1 and EUR 9.8 billion and an adjusted net income in a range from EUR 2.1 billion to EUR 2.6 billion, E.ON said.

The company announced additional cost savings of EUR 1.5 billion per year by no later than 2015 through a simplification of group structure, as a reduction of non-personnel costs alone could not achieve the necessary cost savings. According to initial considerations of the Board of Management, 9,000 to 11,000 jobs, primarily in administrative functions, could be affected in the medium-term on a group wide level, E.ON said. The decisions of the Supervisory Board regarding job cuts shall be adopted in autumn.

RWE also reported weaker year-on-year figures for the first half of 2011 and cited the recent energy turnaround as a reason.  While group revenue was at almost the same level as in the first half of last year (EUR 27 billion), EBITDA fell by 25% to EUR 4.6 billion. The operating result decreased by 33% to EUR 3.3 billion. Recurrent net income declined by 39% to just under EUR 1.7 billion. “The decisions made by the German government have led to substantial financial burdens. However, the German government’s energy concept also presents us with opportunities which we would like to make use of,” said Dr. Jürgen Großmann, CEO of RWE AG and a strong proponent of nuclear energy in the past. RWE wanted to become “more sustainable, more international and more robust” in the future, Dr. Großmann pointed out.

Unlike E.ON, RWE did not announce job cuts, but said in its report for the first half of 2011 that it raised its target for its ongoing efficiency increase programme containing cost cutting and revenue increase measures until 2012 from EUR 1.4 billion to EUR 1.5 billion. A new efficiency programme shall be launched in March 2012, the company announced.

In June 2011 E.ON and RWE filed a lawsuit against the nuclear fuel rod tax, which was introduced with the government’s previous Energy Concept of 2010 that contained a nuclear power extension, but not abolished when the government decided about an accelerated withdrawal from nuclear energy after the Fukushima nuclear accident this year.

Source: E.ON AG, RWE AG

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