Friday 13 November 2015

E.On report Q3 2015

E.On, Q3, 2015, front page

The German electricity companies are not having an easy time as it is and then they are often deciding themselves to add some more salt to those wounds. By this I mean that they are taking massive impairment costs. E.On is in my opinion strategically doing that for the split that will happen next year but in many cases those values should probably have already been written off. My problem with all this has to do with the P/B line of the contrarian strategy that I followed when I for instance bought E.On. A P/B of 0.5 looks good but with too many impairment costs that P/B very quickly end up at a level that well... make the investment look a lot less interesting to be honest. The huge impairment costs for E.On had already been announced so the market response was not as bad as it otherwise would and should have been.

For the report in full please go here and to see my previous summary please visit E.On report Q2 2015 and to find out more about E.On then please go to analysis of E.On 2015.

So let us take a little look at the financial statement for E.On and there we can see that they have kept increasing their sales during 2015 and are almost 5% up compared to 2014. The material costs have however significantly increased also which is disturbing but not even close to the impairment cost that is for the running nine month up at almost -11 billion €. 11 billion € is a fantastic amount of money that is just with the stroke of a pen, or maybe better put, on a keyboard gets wiped out from the books. 11 billion! To me it is really impossible to understand such massive impairment costs and it should be illegal. I mean... for such an impairment cost to appear things have been going seriously wrong for a serious amount of time. These things are impossible to create over night and that means that I as an investor have been fooled by the managers and fooled by the auditing companies for a long time... or is there another acceptable explanation for such impairment costs?

E.On, Q3, 2015, financial statement

Conclusion: E.On is by the look of it doing everything they can to guarantee an as great start as possible for the two companies next year. The older me is paying for the future me. To split old soggy companies can sometimes lead to values being shown but I doubt that will happen in this situation because E.On have worked too hard with writing down values. If they would have expected it to show on its own they would not have needed to use these financial tricks. I am still a grumpy shareholder that still dislike the CEO and I am thinking about how I can make the future me having an even better time.

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