AGL Energy reports a 55% drop in its net profit; Shares down on ASX

Key Highlights:

• AGL Energy shares dropped over 10% following the release of its 1H FY2023 results.
• The results were impacted majorly by the outages and the existing energy market during the period.
• AGL Energy also narrowed its FY2023 guidance.

AGL Energy Limited (ASX: AGL) shares dropped over 10% following the release of its 1H FY2023 results. AGL stock was the top loser on ASX 200 today. AGL Energy is a top integrated essential service provider with a 185-year history of innovation and a passionate belief in progress. The Company delivers 4.2 million energy and telecommunications services to residential, small and large business, and wholesale customers in Australia.

The Company highlighted that outage and the existing energy market impacted its performance during the period. Earnings were also affected by the closure of Liddell Unit 3 in April 2022. As a result, the generation volumes declined. Besides this, the period also witnessed another disruptive period for energy markets via the implementation of domestic commodity price caps and a Mandatory Code of Conduct for gas producers. 

On that note, let's see the performance of the Company in 1H FY2023.

1H FY2023 Highlights:

Underlying EBITDA stood at AU$604 million, down 16% compared to the previous corresponding period.

• Underlying Net Profit after tax declined 55% to AU$87 million on 1H FY2022.
• The interim ordinary dividend (unfranked) for the period was AU 8 cents per share.
• Total AGL customer service was 4.3 million, up 61,000 on FY2022.
• Total generation volumes declined 7% on 1H FY2022. The fall in the generation volumes was due to an extended forced outage plus the closure of Liddell Power Station Unit 3 in April 2022.

Key Developments in 1H FY2023:

In late September 2022, the Company announced a refreshed strategy representing one of Australia's most significant decarbonisation initiatives.

• AGL endorsed its Inaugural Climate Transition Action Plan at the AGM in November 2022.
• The Company confirmed the appointment of CEO and CFO during the period. Now AGL team comprise of highly experienced Board and Management Teams to execute its strategic plans and the accelerated decarbonisation pathway. Thus, setting up a stronger future for AGL and its shareholders.

Outlook:

For FY2023, the Company has narrowed its earnings guidance ranges.

• Underlying EBITDA, which was expected to range between AU$1,250 million and AU$1,450 million, has been changed to AU$1,250 and AU$1,375 million.
• Underlying Net Profit after tax narrowed to between AU$200 and AU$280 million. It was earlier in the range of AU$200 and AU$320 million.

FY2023 guidance reflects a potential improvement in the 2H FY2023 in line with expectations. It is driven mainly by a projected increase in generation, with better plant availability and a decrease in outages, partially offset by lower forward electricity prices.

After the end of FY2023, the Company expects its outlook to be positive. Wholesale electricity pricing continues to be elevated compared to previous periods, with AGL projected to benefit as historical contract positions are reset in FY2024 and FY2025.

Bottomline:

A significant drop in the net profit impacted its share performance. But at the same time, the narrowed earnings guidance presented by the Company could not impress the investors today. As a result, the shares tumbled significantly by 10.768% and are trading at AU$7.085 (AEDT: 1:05 PM).

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