E.ON AG (EOAN.XE) Wednesday said profits wouldn't fall in 2009 by as much as it had feared, and confirmed it will sell its Thuega unit by the end of the year.
E.ON cited lower increases in interest and tax expenses as the main reasons for the slightly improved guidance, although the company also said it's seeing the first signs that the demand slump caused by the economic recession is abating.
In a separate statement, the company also said it will sell its unit Thuega, a holding firm which bundles stakes in around 100 municipal utilities, to a consortium of German municipal utilities for EUR2.9 billion. The transaction is expected to close in 2009, subject to antitrust approval.
Germany's largest utility by market value said Wednesday it now expects after-tax profit adjusted for non-recurring items to fall between 5% and 10% on the year, after previously forecasting a 10% drop.
In the first half of the year, E.ON increased adjusted after-tax profit by 4% to EUR3.5 billion, the company said.
E.ON reiterated that it still aims for 2009 earnings before interest and taxes, or EBIT, adjusted for non-recurring items, to come in around last year's level.
In a presentation on its Web site, the company said the recession would lower adjusted earnings before interest and taxes in 2009 by around EUR400 million.
German energy consumption in the first half of 2009 averaged a fall of around 8% on the year due to a sharp drop in demand from energy-intensive industries that cut back on production during the recession, Germany's energy and water lobby group BDEW said last week.
E.ON also said second-quarter net profit rose to EUR1.85 billion from EUR882 million in the same period of 2008, due mainly to lower interest and tax expenses. The figure exceeded the EUR1.11 billion that 15 analysts polled by Dow Jones Newswires had forecast.
E.ON didn't publish a second-quarter figure for earnings before interest and taxes adjusted for disposal-related book gains or losses as well as other non-recurring items. A Dow Jones Newswires calculation showed that adjusted EBIT in the three months to June 30 rose to around EUR2.6 billion from EUR2.48 billion a year earlier.
Improved earnings from newly acquired businesses in Italy, France, Spain and Russia, as well as higher profits from the company's renewable energy unit, helped increase operating profit.
Higher energy grid fees and improved efficiency in its core German market further boosted earnings.
E.ON's pan-European gas business, on the other hand, suffered from weak demand during the economic recession, while the U.K. and Nordic market units were hit by the decline in the value of both sterling and the Swedish krona in euro terms.
E.ON's second-quarter sales fell to EUR16.58 billion from EUR18.38 billion in the year-earlier period, reflecting weaker demand during the economic recession.
"The figures look pretty good at first, but at second glance they're only in line with expectations," said Sal. Oppenheim analyst Stephan Wulf, who rates E.ON as buy.
E.ON recorded a "very strong trading result," he said, but cautioned that this performance might not be sustainable, given the volatile nature of that business.
"The slightly increased guidance for adjusted net income is nice, but given that it still aims for flat adjusted EBIT the improvement isn't likely to be based on operating factors," Wulf said.
At 1038 GMT, E.ON's shares traded up EUR1.14, or 4.4%, at EUR26.95, outperforming a slightly higher blue-chip DAX index.