WRAPUP 2-Europe utilities Q1 rises on winter not recovery

Tue May 11, 2010 10:55am EDT

Related Topics

* E.ON says remaining conservative in FY outlook

* Reiterates 2010 adjusted EBIT might rise 3 pct

* EDF reiterates 2010 EBITDA might increase 5 pct

* CEZ repeats sees 2010 EBITDA down 3 percent

* E.ON down 0.75 pct, EDF slips 0.05 pct, CEZ dips 1.5 pct

(Adds detail, quotes)

By Peter Dinkloh

FRANKFURT, May 11 (Reuters) - European utilities clung to their 2010 profit outlooks as they reported soaring first-quarter earnings from a cold winter and not due to economic recovery on the continent.

German utility E.ON (EONGn.DE), the world's largest power provider by sales reiterated it expected adjusted earnings before interest and taxes (EBIT) to rise as much as 3 percent.

EDF (EDF.PA), Europe's third-biggest utility by sales, repeated it expected earnings before interest, taxes, depreciation and amortisation (EBITDA) to rise as much as 5 percent while Czech peer CEZ CEZPsp.PR confirmed its forecast for EBITDA to drop 3 percent. [ID:nLDE64A059] [ID:nLDE6491VK]

Industrial production throughout Europe has been picking up after manufacturers across the region scaled back production and idled plants in the face of the lingering economic downturn.

The European Union stated that industrial production, a key indicator of energy demand, in its 27 member states dropped last year to levels previously seen a decade ago.

Euro zone industrial output rose much more than expected in February, highlighting the manufacturing sector's strong role in economic recovery. It was a 4.1 percent rise on last year, however it was only a 0.9 percent increase month-on-month. [ID:nLDE63D0YC]

The utilities are not yet confident about the recovery.

"In Germany, for example, industrial output is still 20 percent below (last year) and power demand year-on-year to date is still 3 percent lower. Accordingly, the recovery remains fragile," E.ON said.

"E.ON is remaining conservative regarding the full year and stands by its cautiously optimistic forecast."

Kepler Capital Markets analyst Ingo Becker said the cold weather boosted earnings to the extent that it would help the companies' full-year earnings.

"Utilities have enormously benefitted from the cold winter," said "The demand from the winter will be helping the gas and the power business (throughout the year)."

Becker predicted E.ON's adjusted EBIT would climb 4 percent while EDF's EBITDA would rise 6.3 percent.

LBBW analyst Bernhard Jeggle agreed that E.ON's EBIT forecast was conservative.

Both CEZ and E.ON beat market expectations with their first-quarter earnings. CEZ' net profit dropped 8.6 percent, less than the 9.9 percent decline seen by analysts in a Reuters poll, while E.ON's adjusted EBIT, reported last week, rose 20 percent compared to the 16 percent rise expected in a Reuters poll. [ID:nLDE6431W]

EDF released only first-quarter sales on Tuesday.

At 1453 GMT, E.ON shares were down 0.75 percent to 25.13 euros, EDF had dipped 0.05 percent to 38.21 euros and CEZ was down 1.5 percent at 915.00 crowns, compared with a European utilities index .SX6P down 1.0 percent.

Italy's Enel (ENEI.MI) and Germany's RWE (RWEG.DE), Europe's fourth- and fifth-largest utility, will report earnings on Wednesday. (Editing by Karen Foster and Simon Jessop)

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