Verbund: Record low water supply dried up profit - Instant Earnings Comment from Concorde Securities Ltd. (Hungary)
Verbund - Instant Earnings Comment
Recommendation: Neutral (unch.)
Target price (12M): EUR 38 (PREV:EUR 27)
Record low water supply dried up profit
- Management cut FY EBITDA and profit guidance. End year EBITDA and profit were slashed by ca. 10% to EUR 870 million and EUR 340 million respectively on the back of mentioned drought in Q3.
- Operationally, similar happened before when water supply was low. Revenue was flattish but margins fall sharply as the contracted volume was not generated but purchased on spot instead. EBITDA margin dropped by 900 bps to 25%, as expenses for electricity purchases increased by ca. 30% y-o-y. Quarterly EBITDA came in EUR 175 million 30% lower than last year due to the above mentioned issue, this took its toll on profit which also suffered and almost halved from last year’s level (EUR 62million vs. EUR 115 million).
- Flexibility products which are even more volatile revenue source than the underlying operation has achieved EUR 115 million 18% lower than last year but this performance is in line with management guidance (EUR 160 million for FY vs. EUR 115 million in 9M).
- Hydrological conditions were tragic during this quarter. According to management the months of July, August and September were among the driest on record, resulting a 26% lower than average water supply based on Verbund’s Hydro coefficient during Q3.
Verbund is a public utility company engaged in the generation and transmission of electricity from subsidiaries' hydro and thermal power stations located throughout Austria. Through its subsidiaries, Co. is involved in the planning and construction of water systems, hydroelectric power plants, river structures, sewage disposal systems, and high voltage transmission towers and lines. Co. generates, trades and sells electrical energy to power exchange buyers, traders, energy supply companies and industrial companies as well as households and commercial customers.
Concorde Securities Ltd. is Hungary’s leading independent company engaged in investment banking activities. It provides its clients with integrated financial services, including securities trading, research, corporate financing advisory, capital market transactions, wealth management and investment advisory. The operational management of the company is the responsibility of the CEO, while the owners/managers (who control one-third of the company through their shares and options) are in charge of its strategic governance. Concorde Securities Ltd. is a member of the Budapest, Frankfurt, Warsaw and Bucharest stock exchanges, as well as of the Hungarian Association of Investment Service Providers.
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