Origin Energy (ORG) said on Thursday it expects a strong second half after delivering a fall in underlying profit for first half results, propelling the shares in the gas and electricity retailer as much as 8.6% higher.
Shares in ORG ended a five-day losing streak, climbing 63 cents or 7.9% to finish at $8.55.
The Sydney-based company posted an underlying profit of $200 million for the half year ended 31 December 2007, a decline of 3% on the prior corresponding period.
However, including one-off items, net earnings increased 44% to $335 million from $233 million in the prior half year.
“Notwithstanding the small decline in underlying profit of 3% to $200 million, our operating cashflow after tax of $385 million was up 5% on the previous corresponding period. This reflects the strength of Origin’s business,” chairman Kevin McCann said.
The net profit contains a number of significant items and one-off costs such as Contact Energy’s retirement of the New Plymouth Power Station and Origin’s acquisition of Sun Retail.
Origin is positive in its second half results based on the performance for the opening two months and the continuation of current market conditions.
A decrease in wholesale electricity costs and the addition of earnings from the Otway Gas Project in March 2008 are are primarily behind the positive outlook, the company said.
“We had previously given guidance that growth in full year profit would be between 10-15%. Based on current market conditions we expect a stronger second half which should result in an increase in full year profit of at least 15%,” McCann said.
An interim dividend of 12 cents per share was declared, compared to 10 cents for the prior half year.
“Recent additions to the company’s debt facilities, together with strong cash flow, see the company well placed to continue to access funds for its ongoing development and growth,” Origin said.
This alleviates any possible concerns investors may have in the face of companies facing debt problems and margin calls in the current reporting season.
The Exploration and Production segment achieved record production and revenue for the half year.
In retail, sales volumes and revenues were records for the first half, following the acquisition of Sun Retail.
Its Contact Energy business contributed $246 million to earnings before interest, tax, depreciation, amortisation and change in value of financial instruments (EBITDAF).
Managing director, Grant King said, “Despite high levels of competition we continue to grow our Retail business”.
Origin Energy is a top 100 ASX listed company involved in gas and oil exploration and production, energy retailing, power generation and utility network management, and has been listed on the Australian Stock Exchange since 1961.
