Suez posts H1 net profit of EUR 1.9 billion, reiterates growth prospects
Suez reported a net profit of EUR 1.9 billion on Thursday for the first half of 2007, down 13% year-on-year due mainly to a lower disposal rate. Excluding the net impact of disposals, the group’s profit increased by 11.8% year-on-year to hit EUR 1.6 billion.
Disposals amounted to EUR 226 million for the first half of 2007, compared with 726 million over the same period last year.
While mild weather this year has dented most energy companies’ half year results, Suez said: “The group’s operating performance saw a sharp increase in spite of unfavourable weather conditions in Europe.”
GDF, which is poised to merge with Suez, posted a similar net profit on Wednesday. GDF made EUR 1.5 billion in the first half of 2007, down 11% year-on-year. The losses were attributed to the relatively warmer winter. There remain, however substantial discrepancies in market value between the two companies, which some analysts have recently pegged at around EUR 16 billion.
Suez revenues amounted to EUR 23.73 billion, as announced at the end of July (see EDEM 11.147), up 6.1% on the previous year.
Operating income totalled EUR 2.8 billion, up 17.3%, while EBITDA (earnings before interest, tax, depreciation and amortisation) rose 10.4% year on year to EUR 4.1 billion, compared with EUR 3.8 billion for GDF.
The group confirmed its 2007 targets, expecting EBITDA to grow a further 10% compared to 2006. Suez plans to plough over EUR 1 billion into a share buy-back scheme later this year, while another EUR 5 billion will be set aside for investments.
Regarding medium-term targets (2007-2010), the group forecasts its EBITDA gross operating income to hit EUR 10 billion by 2010, 50% more than 2006. Investments are also set to increase to EUR 20 billion over the same timeframe.
GDF Suez merger
“These promising prospects would be strengthened by the planned merger with GDF,” the company said on Thursday, although Gérard Mestrallet, head of Suez, was quick to point out the group would consider continuing its “standalone dynamic” if the merger were to fall through.
On Wednesday GDF made it clear the ball was in Suez’s court although the decision fundamentally lies with the French government – the majority GDF stakeholder. France also holds a stake in Suez through state-owned financial institution Caisse de Dépôts.
French president Nicolas Sarkozy told reporters on Thursday he would only accept an “energy-only” merger, implying Suez should dispose of its environmental and water service business, a move the group has always refused to consider.
Late Thursday afternoon, the EU 90 billion merger deal looked increasingly like a sinking ship. At the close of the markets, Suez shares were up 5.32% day-on-day at EUR 41.00 per share, while GDF shares made more modest gains, up 3.84% to EUR 35.40. KT
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