February 15, 2019 / 6:55 AM / 7 months ago

French EDF's shares slide on cautious outlook, dividend cut

PARIS (Reuters) - Shares in French EDF fell almost 6 percent on Friday after the state-controlled utility cut its dividend and said there was no guarantee that it could repeat 2018’s double-digit core earnings growth.

FILE PHOTO: The logo of Electricite de France SA (EDF) is pictured on the facade of a building in Paris, France, August 5, 2018. REUTERS/Regis Duvignau/File Photo

EDF forecast core earnings of 15.3 billion to 16 billion euros ($18.1 billion), below analyst expectations for about 16 billion and with the low end of the forecast range only just above last year’s 15.25 billion.

“We are not sure some of the positive elements in our 2018 will be repeated in 2019,” EDF CEO Jean-Bernard Levy told reporters on a call.

He said that besides exceptionally good hydropower earnings, 2018 trading results were also above what could be expected in a normal year, but added that wholesale power prices should be slightly higher this year.

“It is possible our 2019 results would be close to those of 2018, but we hope that they will not come in at the lower end of our forecast range,” Levy said.

EDF shares were down by 5.5 percent at 14.03 euros by 1305 GMT, having fallen as low as 13.94 euros earlier.

Investment bank Jefferies, which kept a “buy” rating on EDF, said that EDF’s latest guidance was some 4 percent below consensus expectations.

“At first glance, the more moderate year-on-year growth compared to expectations may be due to lower open exposure to power prices, normalization of French hydro output and weaker results in EDF’s UK business,” the bank’s analysts wrote in a note.

In a call with analysts, finance chief Xavier Girre said, however, EDF was confident it would be able to grow core earnings in 2019.

NEW SHARES

EDF proposed a 31 cent dividend, in line with forecasts but down from 46 on 2017 earnings, with the option of payment of the dividend balance in new shares.

EDF said the state, which owns an 83.7 percent stake, would take the balance of the 2018 dividend in shares and would do the same for dividends on 2019 and 2020 earnings.

Nuclear output in France totaled 393.2 terawatthour, up 3.7 percent on 2017, when several reactors were closed for long safety-related outages. For this year, EDF forecast only a small increase to 395 TWh.

Hydropower output jumped 25.4 percent to 46.5 TWh as a wet 2018 followed a dry 2017.

The utility’s 2018 sales were up 6.3 percent to 68.98 billion euros and core earnings before interest, tax, depreciation and amortization (EBITDA) were up 11.1 percent to 15.25 billion, both in line with forecasts.

But earnings before interest and tax (EBIT) were down 6.3 percent to 5.28 billion and net income plunged 63 percent to 1.18 billion due to a fall in fair value of debt and equity on dedicated assets.

EDF said it would again target positive cash flow, excluding costs linked to its Hinkley Point, UK nuclear project and the rollout of its Linky smart meters in France.

Its 2018 cash flow was 1.13 billion before Linky, “new developments” and asset sales, but taking account of these elements and after the payment of its dividend, cash flow fell 271 million euros to minus 480 million euros.

($1 = 0.8858 euros)

Reporting by Geert De Clercq; Editing by Sudip Kar-Gupta/Edmund Blair and Emelia Sithole-Matarise

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