Good result in first 9 months despite poorer third quarter - Lower valuation of commodity positions due to falling oil price
2008 third quarter highlights
- Net result EUR 2 million negative due to lower valuation of commodity positions and revaluation of an investment
- Excluding incidental items and fair value movements net profit increased this quarter
- Customer base in the Netherlands stable, growth in Germany and Belgium
- Operating cash flow has strongly improved
- Expenses increase due to strategic processes including unbundling
Nov 03, 2008 | Amsterdam Good result in first 9 months despite poorer third quarter
The third quarter saw significant value decreases in commodity positions (fair value movements), caused by falling commodity prices. The trading results also decreased, causing a decrease in the gross margin. In addition, the third quarter of 2008 showed a lower margin on the generation of electricity, lower production and increased purchasing costs compared to the third quarter of 2007. The reported net loss came to EUR 2 million (EUR 179 million/2007). Despite this, the nine months net profit of EUR 686 million was still slightly higher than the outstanding 2007 results (EUR 665 million). The operating expenses increased due to growth in activities, strategic processes including unbundling and the revaluation of an investment connected with the credit crunch and the formation of a provision in this connection.
The net turnover remained stable this third quarter at EUR 1,070 million compared to the third quarter in 2007 (EUR 1,073 million). The net turnover of gas increased mainly due to higher sales in the business market and the participation in gas fields in the North Sea. The gas turnover compensated the lower turnover of electricity which was caused by a significant decrease in, notably, fair value movements. This valuation of commodity contracts is strongly influenced by the commodity prices in the world market, which declined this quarter.
This also influenced the gross margin, which decreased this quarter to 44% (54% in 2007). Alongside these lower fair value movements the gross margin on electricity of EUR 199 million (EUR 353 million/2007) was also dampened by the lower production results. The gross margin on gas increased this quarter to EUR 144 million (EUR 92 million/2007). This was mainly due to a positive margin on the exploration and production activities resulting from the purchase of interests in gas fields in the North Sea this spring.
Commenting on the results Øystein Løseth, Chairman of the Management Board, says: "The first three quarters showed better net results this year than in 2007, which was already an exceptionally good year. The initial sharp spike in the commodity prices had a positive effect in the second quarter. That is now being cancelled out by the decline in commodity prices in the third quarter. Despite the declining commodity prices in this quarter we are compelled to raise the tariffs for Dutch consumers; these are based on the purchasing prices in a longer preceding period. The credit crunch is having an impact on an investment relating to a cross border lease, for which we have also made a provision. The number of customers in the Netherlands once again remained stable. In Germany and Belgium we saw the number of customers grow further."
Expenses
The efforts in connection with strategic processes including the unbundling of Nuon into a network company and a production and supply company have led to an increase in, notably, ICT and personnel expenses. Other expenses concern the credit crunch, which necessitated a revaluation of an investment relating to a cross border lease. A provision was also made in this connection. An increase in the commercial activities also led to a higher level of expenses. The production and supply company saw a growth in activities at installation subsidiary Feenstra and Nuon Germany; the network company continued with the roll-out of smart meters and installation activities.
First three quarters
The net turnover increased in the first three quarters of 2008 to EUR 4,531 million (EUR 3,871 million/2007), principally due to higher trading results and other fair value movements of EUR 317 million (EUR 61 million/2007). The gross margin increased from EUR 1,857 million in 2007 to EUR 2,103 million in 2008. In net turnover percentage terms the gross margin fell slightly from 48% in 2007 to 46% in 2008. The operating expenses in the first three quarters of 2008 amounted to EUR 1,170 million, representing an increase compared to 2007 (EUR 928 million). The reported net result after taxation of EUR 686 million was higher than in 2007 (EUR 665 million).
Market development
In Germany the number of electricity customers increased again while the area in which Nuon Germany is active with electricity and gas sales was again expanded this quarter. Nuon Belgium showed comparable customer growth. The number of gas and electricity contracts remained stable in the Netherlands.
Operating cash flow and debt position
Investments in, notably, the replacement and expansion of the electricity and gas networks and investments in the power stations and in underground gas storage increased to EUR 589 million (EUR 350 million in 2007). The net cash position amounted to EUR 98 million, a decrease compared to the end of 2007 (293 million). This was mainly due to the payment of dividend and the increase in the short-term debt due to the purchase of the interests in gas fields in the North Sea. Conversely, the long-term debts declined this quarter compared to the end of 2007. The cash and cash equivalents are maintained in connection with the significant investment programme.
About Nuon
Nuon is an ambitious energy company, serving more than three million consumers and organisations with over 10,000 employees in the Netherlands, Belgium and Germany. Nuon produces, transports and delivers electricity, gas, heating and cooling, and engages in energy trading in the major international markets. Nuon also supplies additional services and technological innovations to businesses and consumers. In doing so, Nuon aims to provide a reliable, sustainable and affordable energy supply.
With a turnover of EUR 5.7 billion in 2007, Nuon occupies a prominent position in the Dutch energy market. The shares are held by local and regional authorities.
As from 1 July 2008 Nuon organisationally separated the company into a network company and a production and supply company. As from that date, both companies operate independently under a single financial holding company and under a joint Management Board.
Further information
Nuon Press Office
Telephone: +31 (0)20 597 42 00
E-mail: pressoffice@nuon.com