(Bloomberg) -- A surprise slump in Centrica Plc’s North America business helped send the utility’s shares down the most in 20 years.
Adjusted operating profit for the unit is this year expected to plunge 64 percent from a year earlier, the Windsor, England-based company said Thursday in a trading statement. In Centrica’s results statement less than four months ago, it still said its North America Business “continues to build on its position.”
“Management seem to be completely blindsided by the development in North America retail,” said Deepa Venkateswaran, a European utilities analyst at Sanford C. Bernstein & Co. in London. “We believe that management credibility with investors is now at an all-time-low.”
Centrica bought Direct Energy in 2000 and it now has 5 million customers, making it the third-largest commercial and industrial retailer in North America. It is the largest household energy retailer in the region, providing residential natural gas and power in 13 U.S. states, as well as Alberta, British Columbia and Ontario.
The lowered U.S. outlook comes as a result of “highly competitive” market conditions and low price volatility putting downward pressure on power margins, as well as low volatility reducing opportunities for gas optimization, Centrica said. Separately, the company’s U.K. energy business lost more than 800,000 customers since the end of June.
“I am in particular disappointed in our North America Business,” Chief Executive Officer Iain Conn said on a call with analysts. Performance indicators weren’t fully visible in July during the company’s market communication when Centrica was “feeling competitive pressure but had not seen some of the North America headwinds,” he said.
The adjusted profit outlook for the North America Business unit was revised down to 80 million pounds ($106 million) for this year. The unit is taking a one off non-cash post-tax charge of 46 million pounds related to billing, Centrica said.
The company is forecasting earnings per share of 12.5 pence, down 26 percent from last year, according to Thursday’s trading statement. The average estimate by 20 analysts polled by Bloomberg is 15.5 pence. Centrica fell as much as 18 percent to 133.7 pence in London, the lowest since March 2003, before trading at 139.3 pence. It is down 41 percent this year.
When asked if Centrica would consider selling the North America unit to give some stability to its balance sheet, Conn said it was “core” to the company. However, there are questions about the suite of products the company is offering to customers in the U.S., he said.
“I don’t think that the outcome of North America Business today reflects the future of that business,” he said.
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