Germanys biggest energy provider as well as being one of my holdings arrived lately with their annual report. The market accepted it very well since it was up almost half a %-age on a day that generally was very negative and over the day it kept going further and further down. So what was then in the report?
All the data has been taken from the annual report that was published here in full. In the table below they have listed what they call the financial highlights during the year. What we see there is for instance that they have had a decrease in produced MW of electricity which of course lead to a significant decrease in sales revenue of almost -7%. Only good thing there is that their production dropped by -10% so they managed to keep the revenue up better then the sales volumes.
We also see that there was a decrease in earnings in comparison to 2012 which is never good. They have had a significant decrease of employees but that comes to a very large extent from divestments that they have done during 2013. We now also see the effect of the dividend policy of 50-60% of the earnings since we shareholders received a significant cut in dividend payments and the suggested on is 0.6 € in comparison to 1.1 € that we received last year. As I have mentioned before I find this fully reasonable even though E.On. is not very good at taking care of the equity. We also see a significant drop in equity from 2012 to 2013 and this I do not like but the new analysis of E.On based on this annual report will show how bad (or not) that it really is.
Looking at the consolidated financial statement we can see even better that they took better care of the money flowing in than back in 2012 and they managed to significantly decrease the "material" costs as well as employee costs which is the reason for the very small change in earnings per share in comparison to 2012 even though they had -10% in sales.
Every now and then I must say that I am happy to write this blog because it makes me go back and take a look at what was the latest news. What did I write the last time when they published the Q3 report and what I then wrote can be found here.
So what then happened in Q4 and why does E.On. not report Q4 and compare that? Simply put because they are using the classical deceiving shareholder strategy and bunking up all the negative costs in the fourth quarter.
So in Q4 2013, which for electricity sales is one of the biggest quarters in north of Europe due to the cold winter (as well as Q1), they made sales of 34,877 million € and happy, happy, joy, joy on that they made net earnings of -471 million euro. So well done E.On. and the management of E.On. you must be proud of yourselves for placing all the "ugly" costs into the 4th quarter of 2013 and trying to hide it in the annual report. I had previously expected an EPS of around 1.83 € and a worst case scenario of 0.92 € dividend per share and instead the EPS becomes 1.12 € and the dividend 0.6 € per share. I am not happy.
Conclusion: E.On. keep running the ugly strategy of hiding losses during the year and bunking them into the final quarter. One day the management will be changed out and it is my hope that this kind of dishonest and ugly book keeping behaviour will then also be removed. Even though I am unhappy with the management and the strongly decreased dividend I will remain as a shareholder knowing that energy companies will soon start to perform better again even without cooking of the books.
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