AGL Energy confirmed a lower first half profit yesterday, thanks to the wet weather at the end of 2010.
In fact you could argue that AGL is another victim of the La Nina weather event, with its wet weather and mild temperatures across much of eastern Australia.
The company told the ASX that underlying profit, which excludes significant items, fell 3.7% to $226.2 million.
AGL signalled the lower profit earlier this month when it cut its full year guidance by $30 million due to wet, mild weather around Australia, especially in Queensland, NSW and Victoria in the closing months of 2010.
The company said in yesterday’s statement that, "Contributions from AGL’s core Retail and Merchant businesses were, in aggregate, up slightly on the results for the prior corresponding period, but a much lower than expected contribution from the investment in the Loy Yang A power station brought the overall result down 3.7 per cent on that for the prior corresponding period".
Despite the fall, CEO Michael Fraser maintained AGL’s guidance of underlying profit for the full year of between $415 million and $440 million.
After significant items, the interim result looked a lot better, up 30.4% at $239.6 million for the six months to December 31, 2010, up from $183.7 million in the first half of 2009 (when the company recorded a number of write-downs).
AGL says yesterday it was "heading in the right direction," with the retail and wholesale electricity businesses expected to perform well in the second half.
(So long as the weather behaves, no doubt.)
The retail energy division increased earnings before interest and tax by 5.6%, reflecting an increase in the gas and electricity gross margins.
The wholesale gas gross margin rose 32.5% due to a cold winter on the east coast, gas haulage costs and active portfolio management.
AGL declared an interim dividend of 29c per share, unfranked, steady with the prior corresponding period.
That tells us that the company is maintaining a conservative outlook.
Despite meeting the revised guidance, AGL shares lost 21c, or 1.4%, to close at $14.46.
Virgin Blue (VBA) was another company reporting yesterday to reveal a well signalled slide in profit.
The company said in its interim report to the ASX the outlook for the second half of this financial year was "challenging", due to flat consumer confidence, an excess in capacity in the domestic market and rising fuel costs.
Virgin said earnings fell 62% to $24 million for the first half, which was in line with its guidance released last month when it downgraded earnings expectations.
The company blamed the drop on the Queensland floods, the reservation system meltdown and a slowdown in consumer spending.
VBA shares eased half a cent to end at 38c at the close.
Virgin Blue said domestic demand from leisure travellers in the second half would be adversely impacted by ‘‘flat consumer confidence, forecast industry capacity growth and flow-on impacts from the recent weather events’’.
The airline has under review capacity for the domestic market, stressing that it had the flexibility to reduce it below the full-year growth target of 6% to 8%, if required.
It has declined to give specific guidance for the full year. It would only say that ‘‘we are on track to significantly strengthen our position in both leisure and corporate markets’’ next financial year.
Despite the weak first-half earnings, Virgin Blue’s chief executive John Borghetti said in a statement that the airline was experiencing yield improvements for both short and long haul flights. Long haul operations, in particular, were seeing a ‘‘strong increase’’.
Mr Borghetti said its long haul offshoot, V Australia, was close to breaking even after a $17 million improvement in its operating position in the first half.
‘‘Recent gains in the corporate and government markets have helped to push our yields higher, and despite tough conditions with the leisure market, Virgin Blue increased revenue by 12 per cent,’’ he said.
The long haul airline, V Australia, will begin flying to Abu Dhabi in the United Arab Emirates tomorrow, as part of its joint venture on the route with Middle Eastern airline Etihad.
The airline did not pay an interim dividend.
The result did win approval from analysts, with RBS saying yesterday that profit before tax of $72m "was in line with guidance on revenue of $1,695m (RBS $1,702m)".
The broker said it was a solid result in a transition year for the airline and "it was particularly encouraging to see management state its expectation that long haul operation should be close to break even for the full year".
Goldman Sachs said in a note to clients, "Positive: VBA expects further strengthening in business demand for both domestic and international travel, where confidence is returning and leading the economic recovery.
"Negative: in the domestic leisure market, flat consumer confidence, forecast industr
