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Iberdrola Expects ‘High Single Digit’ Profit Growth in 2020

Iberdrola Expects ‘High Single Digit’ Profit Growth This Year

(Bloomberg) --

Iberdrola SA expects sharp growth in profit this year, driven by rising power output after earlier investments in renewable energy and transmission assets ramped up.

  • Earnings before interest, taxes, depreciation and amortization rose 8.1% to a record 10.1 billion euros ($11 billion) in 2019 from a year earlier, roughly meeting the average estimate of 10.01 billion euros by 19 analysts surveyed by Bloomberg. The Spanish utility said that it expects that number to grow by high single digits in 2020.

Key Insights

  • The record investment target for 2020 will see the company spend more than 10 billion euros in a calender year for the first time as it looks to build out its networks and renewables businesses.
  • As part of plans to focus on networks and renewable energy output, earlier this month the utility reached an agreement to sell for 1.1 billion euros its 8% stake in a turbine-maker Siemens Gamesa Renewable Energy SA to Siemens AG.
  • The utility is widely expected to announce new guidance late in the first half. In the later part of last year, the company reached a 3.5 billion-euro asset disposal target early which was set for year-end 2022.
  • The company announced a buyback of as much 1.6 billion euros, or 1.73% of share capital on Monday.
  • Earnings have benefited from increased wind output and helpful energy-retail margins, according to a Bloomberg Intelligence note published before the results.

Market Reaction

  • Iberdrola traded slightly down by 0.1% in Madrid, taking this year’s advance to 16%. That’s beating the 29-member Stoxx 600 Utilities index, which is up 10%.
  • “2020 guidance is very strong, particularly given a sharp drop in power prices in Iberia and a weaker Brazilian real. I expect consensus numbers to edge up as a result,” said Elchin Mammadov, a utilities analyst at Bloomberg Intelligence.
Iberdrola Expects ‘High Single Digit’ Profit Growth in 2020

Executive Reaction

  • While the coronavirus hasn’t impacted Iberdrola’s day-to-day business yet, mainly because it doesn’t have any operations in the Far East, the company is in touch with suppliers to assess a potential longer-term impact, Chief Executive Officer Ignacio Galan said by phone.
  • On future asset disposals: “When somebody is ready to pay a good price for assets then we are ready to trust a transfer transfer of the asset.”

Know more

  • Net profit increased 13% to 3.4 billion euros.
  • Gross investment grew 32% to 8.1 billion euros.
  • Iberdrola said it will propose a dividend of 0.40 euros a share.
  • Total investment of 8.1 billion euros was dominated by 44% in networks and 41% in renewables.
  • Onshore wind production increased 2.4% from 2018, while offshore output advanced by more than 34%.
  • Hydro power output fell to its lowest in a decade.
  • Electricity produced by coal collapsed by almost 79% year-on-year as policies to exit the fossil fuel took hold.
  • Link to full statement

To contact the reporters on this story: Jeremy Hodges in London at jhodges17@bloomberg.net;Rodrigo Orihuela in Madrid at rorihuela@bloomberg.net

To contact the editors responsible for this story: Reed Landberg at landberg@bloomberg.net, Lars Paulsson, Amanda Jordan

©2020 Bloomberg L.P.