You are using an older browser version. Please use a supported version for the best MSN experience.

AGL flags risks to earnings growth

AAP logoAAP 9/08/2016 Prashant Mehra

AGL Energy expects earnings to grow in the current financial year despite unseasonably warm weather at the start of the reporting period and fierce competition for customers.

Unveiling a worse-than-expected $408 million loss for the 12 months to June 30, the energy producer and retailer warned of headwinds in the form of July's weather, the difficulty in passing on electricity price rises to customers due to competition, and ongoing enterprise bargaining agreements at two of its major power plants.

Even so, AGL said on Wednesday it still expects to deliver earnings growth for 2016/17.

The subdued outlook did little to cheer investors, with AGL shares diving more than five per cent after the announcement.

By 1425 AEST, the stock was still down 83 cents, or 4.1 per cent, at $19.53.

While AGL's underlying full-year profit of $701 million was up 11.3 per cent on the previous year and midway through its $650 million-$720 million guidance range, it was lower than average analyst expectations of $711 million.

The company's net loss was weighed down by $640 million of impairment charges related to its previously announced exit from gas exploration and production, as well as restructuring costs.

In 2015, AGL made a $218 million profit.

Managing director Andy Vesey defended the company's performance.

"We are quite pleased with the result given how volatile some of our markets have been and the changes we have seen," he told analysts.

"The year has started off a bit soft for us but we continue to execute on our strategy."

He said the results reflected AGL's steady margins and cost discipline.

He added that the company was on track to achieve its $170 million reduction in operating costs and $100 million cut in capital expenditure by the end of the financial year.

On Wednesday, AGL also announced a $300 million capital expenditure program over three years, to improve its digital interface with customers.

AGL SWINGS TO FY LOSS

* Net loss of $408m vs net profit of $218m

* Revenue up 4.4pct to $11.15b

* Final dividend up 2.0 cents to 36 cents, per share, up two cents

image beaconimage beaconimage beacon