Spain’s Iberdrola Q3 core profit falls on drought, lower margins

* Bottom line hit by worst drought in decades in Spain
* Nine-month earnings in line with Reuters forecasts
* Brazilian assets to list in Sao Paulo in December (Adds Q3 data, details, comments)
By Jose Elias Rodriguez

MADRID – Spanish utility Iberdrola said on Tuesday core profit slipped 8.1 percent in the third quarter from a year earlier as a drought in Spain hit its hydroelectric capacity and on lower demand and margins in Britain.
Earnings before interest, taxes, depreciation and amortisation fell to 1.69 billion euros ($1.96 billion) for the July to September period, a fall partially offset by its international network and renewables business.
Iberdrola’s liberalised power business relies heavily on hydroelectric production in Spain, though one of the worst droughts in southern Europe in decades has sent overall production tumbling almost 58 percent in the nine months to September.
Net profit rose over 53 percent to 898 million euros in the third quarter, Iberdrola said, lifted by an extraordinary dividend from wind-power company Gamesa, now part of Siemens Gamesa, and the revaluation of its Brazilian assets.
BROADLY IN LINE
Nine-month earnings were broadly in line with a Reuters poll, with Ebitda falling 5.1 percent to 5.44 billion euros, compared to a forecast of 5.48 billion euros, while net profit was 2.42 billion euros, compared to 2.47 billion euros forecast.
Iberdrola, which owns Scottish Power, saw core profit in Britain fall 77 percent in the nine months to September to 53 million euros, hit by the depreciation of the pound, lower output following the closure of Longannet coal-fired power station in Scotland, an increase in regulatory costs, weaker gas sales and narrowing profit margins.
Europe’s second-biggest power company by market value, which is pressing ahead with its international expansion with investments in the United States, Britain, Brazil and Mexico, is targeting a net profit growth rate of 7.5 percent until 2020.
Chairman Ignacio Galan did not elaborate on the current forecasts during a conference call with analysts.
In a note to investors, BBVA said Iberdrola’s “mid-single-digit growth target for full-year Ebitda is now extremely challenging.”
“However, the bottom-line target seems achievable (although this is explained by one-offs). We believe the results are very likely to continue to improve in the coming quarters,” BBVA added.
On plans to list its Brazilian business, Galan said he expects the listing to go ahead in Sao Paulo at the beginning of December, adding the utility will send the documents to the Brazilian regulator in the coming days.
Any cut in renewable incentives in the United States would be offset, or at the very least neutralised, by lower corporate taxes being flagged in tax reform proposals, Galan said.
At 1110 GMT, Iberdrola shares were down 1.5 percent, or 0.11 euros, to 6.77 euros, underperforming the overall Ibex market, which was slightly lower on the day. ($1 = 0.8627 euros)

Source: Reuters