July 18, 2014 / 7:11 AM / in 4 years

UPDATE 1-Fortum cuts Russia profit target as second quarter earnings fall

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HELSINKI, July 18 (Reuters) - Finnish utility Fortum said on Friday it was not likely to reach its annual operating profit target of 500 million euros ($676 million) from Russian operations from 2015 onwards due to the weak rouble.

State-controlled Fortum, which has an extensive investment programme in Russia, said it still targets the same profit in Russian roubles. But as the currency has depreciated in the past year due to slower growth in the country as well as political concerns, the target in euros has become unrealistic.

“Fortum is keeping its rouble-denominated target intact,” CEO Tapio Kuula said in a statement. “Currently, the unfavourable exchange balance converts into a lower profit level in euros.”

The rouble has lost about a quarter of its value against the euro since the profit target was set in 2008.

Fortum’s sales in Russia were 234 million euros ($316.41 million) in the second quarter and operating profit in the country was 28 million. Fortum’s total second-quarter sales were 1.016 billion euros.

Fortum also reported a 12-percent decline in second-quarter core operating profit due to low Nordic power prices. Its comparable operating profit in the second quarter was 255 million euros, down from 289 million a year ago, but topping analysts’ average expectation of 232 million euros.

Fortum also said that power demand had remained flattish in both Russia and the Nordic countries in the second quarter. The company repeated that it expects the annual electricity demand growth in the Nordic countries to average 0.5 percent in the coming years.

Shares in the company opened 0.8 percent lower. ($1 = 0.7395 Euros) ($1 = 0.7395 Euros) (Reporting by Jussi Rosendahl and Sakari Suoninen. Editing by Jane Merriman)

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