MightyRiverPower profit jumps, beating prospectus, as sales fall
MightyRiverPower [NZX: MRP] the energy company that went public in May after the government sold half its stake, has stoked optimism it will beat its prospectus forecast for shareholder returns in 2014 after finishing the 2013 year ahead of expectations.
The Auckland-based MightyRiverPower's capital spending in the year ended June 30 was $91.6 million below the forecast in its April prospective financial information (PFI) at $252 million and the company said today that capex in 2014 would be in a range of $125 million to $175 million, compared to the PFI forecast of $199 million.
The company also finished the year with net debt that was $107 million below forecast. At an operating level it squeezed out an energy margin that was 0.5 percent ahead of forecast, earnings before interest, tax, depreciation, amortisation, fair value adjustments and equity accounted earnings that beat the PFI by 2.1 percent and net profit that was 21 percent ahead.
Chairwoman Joan Withers said the company was "comfortable" with its PFI forecasts for 2014, which included dividend payments rising to 13 cents from 12 cents, while noting the improvements since then. MightyRiverPower will give updated guidance at its annual meeting on Nov. 7. The company would be assessing its capex needs ahead of the AGM, she said.
"Everything points to a little bit of further upside in 2014," said Mark Lister, head of private wealth research at Craigs Investment Partners. "They beat their expectations on most metrics."
Lister said MightyRiverPower shares, which rose 0.9 percent to $2.21 today while the NZX 50 Index fell 0.5 percent, "look reasonable at that level." Based on its forecast 2014 dividend payments, it has a dividend yield of about 5.9 percent.
The stock is trading 12 percent below its IPO price of $2.50, and before today had been rated 'hold' based on the consensus of seven analysts surveyed by Reuters, with a median price target of $2.53.
Some investors were critical of the IPO pricing, especially given the stock's performance since then and external threats it can't control may continue to weigh on its performance. They include the potential drop in power demand should the Tiwai Point aluminium smelter close in several years, re-regulation of the electricity market if a Labour-Greens coalition wins next year's election and a watering down in investor demand in the face of new listing such as Meridian Energy.
"It was of critical importance to us to hit our numbers and have a good result," Withers told BusinessDesk. "The best antidote to negative sentiment is to continue with a strong performance."
The 2014 results would be free of "a lot of the noise" that muddied the 2013 numbers, including one-time costs from restructuring its global geothermal investments, unfavourable foreign exchange movements and costs of the IPO, Withers said. It would also include a contribution from its new Ngatamariki geothermal plant
Net profit was $114.8 million in the year ended June 30, up from $67.7 million a year earlier, the company reported today. Sales fell 9 percent to $1.38 billion and the company's energy margin, which is sales excluding line and energy costs, shrank 6.3 percent to $678.3 million.
Total generation fell 9 percent to 6,462GWh, which the company said was mainly due to lower hydro volumes, which were down 8 percent "as result of weak inflows into the Waikato catchments which were only 80 percent of average for the second half of the year."