E.ON SE share price steady, reduces dividend, posts a gloomy profit forecast

E.ON SE is engaged in supplying energy solutions and is currently the largest utility by market value in Germany. The company announced that it plans to reduce its dividend by almost a half to between 1.5 and 1.9 billion euros from 2.24 billion euros last year. After posting a 2013 operating profit decline estimated to 14%, the company also revealed that its net profit for 2013 decreased by 2.3% and reached 2.14 billion euros (2.96 billion dollars).

One of the analysts working for Independent Research GmbH – Sven Diermeier said in a telephone interview cited by Bloomberg: “It’s good that EON confirmed its dividend policy.” He added: “The profit outlook is weaker than I had thought.” The average estimate of 22 analysts surveyed by Bloomberg is 1.87 billion euros for this year.

The company also announced that its underlying profit fell by 46.3% to 2.24 billion dollars. E.ON SE posted declining earnings before interest, taxes, depreciation and amortization, which were estimated to 9.32 billion euros, down 13.5%, following a 7.8% decrease in revenue to 122.5 billion euros.

E.ON SE posted a gloomy forecast for 2014 due to the fact its fossil-fueled electricity business was considerably weakened by subsidy-led boost in renewable energy supply in Europe. It said that the earnings before interest, taxes, depreciation and amortization for the current year should be between 8 and 8.6 billion euros with an underlying profit of between 1.5 and 1.9 billion euros.

Johannes Teyssen, who is the Chief Executive Officer of E.ON SE said for the Wall Street Journal: “Our 2013 results clearly reflect the negative effects of a difficult economic and regulatory environment in Europe.” He pointed out in the statement, which was cited by Bloomberg: “The ramifications of policy decisions in Germany and the related insufficient market prices for conventional energy continue to have an adverse impact on our generation portfolio, which has long been a mainstay of our business.”

E.ON SE rose by 0.19% by 12:19 GMT in Frankfurt to 13.45 euros per share, marking a one-year change of +3.14%. The company is valued at 26.93 billion euros. According to the Financial Times, the 26 analysts offering 12-month price targets for E.ON SE have a median target of 13.00 euros, with a high estimate of 19.00 euros and a low estimate of 10.50 euros. The median estimate represents a -3.17% decrease from the previous close of 13.43 euros.