Power generator and gas company Contact Energy is expected to report a dip in its net profit when it reports its result for 2009-10 on Friday.Brokers First NZ Capital expect the company to produce earnings before interest, tax, depreciation, amortisation
Power generator and gas company Contact Energy is expected to report a dip in its net profit when it reports its result for 2009-10 on Friday.
Brokers First NZ Capital expect the company to produce earnings before interest, tax, depreciation, amortisation and financial instruments (ebitdaf) of $439 million for the year, which would represent a decline of 10.9% compared with the previous year, on an earnings per share basis.
Contact’s earnings have been in decline for some time. The company reported ebitdaf of $445.3 million 2008-9, which was down from $567.7 million in the previous year.
A collapse in wholesale electricity prices is primarily to blame for the disappointing result for 20090-10, First NZ said in a research note.
Forsyth Barr said it would be another difficult year for Contact.
“Strong hydro conditions have suppressed electricity prices and led to Contact not taking all of its paid-for gas,” Forsyth Barr analyst Andew Harvey-Green said.
Analysts said a cut in Contact’s dividend was possible.
Looking ahead, First NZ expects to see a bounce back in Contact’s earnings in the current year and the next, albeit from a low base.
In its first half to December 31, Contact reported ebitdaf of $225.0 million, the same as the prior corresponding period.
At the time, Contact complained that high hydro inflows had resulted in low wholesale prices. Retail competition also remained intense, the company said.
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