AGL's shares in Australia plunge after weaker results reflect the cost of going green
AGL Energy, Australia's largest power producer, reported on Wednesday a 21% decline in its annual underlying profit. It also missed expectations for earnings due to lower retail margins and increased costs associated with the transition to renewable energies.
The shares closed at their lowest level since April 20,24 and had the weakest trading session in October 2007.
The Sydney-based company - Australia's largest carbon emitter – said that it was confident in its investment in large batteries, once they were operational.
AGL CEO Damien Nicks stated on a earnings call that "we have invested heavily in our growth this year with approximately A$900,000,000 ($587.79,000,000) deployed towards batteries developments and strategic investment."
He added that the batteries will also "more than compensate" for rising gas costs, as existing contracts are nearing expiration in 2027. He said: "That's the reason we're going to these as fast and as hard as possible."
AGL will make final investment decisions on grid-scale storage battery projects of up to 900 megawatts as part of its commitment to ambitious renewable energy goals.
It released a new plan on Wednesday that aims to reach 6 gigawatts in renewable energy and storage assets, compared to its previous goal of 5GW.
Its need for cash to fund its green spending led it to declare a final dividend at 25 Australian cents a share. This is down from 35 Australian Cents the previous fiscal year and below the forecast payout range of 50-75%.
Earnings prior to interest, taxes, depreciation, and amortization fell by 9%, to A$2.01 Billion, and core profit dropped by more than a fifth, to A$640 Million.
AGL said that the result was softer due to the compressed margins of gas and electricity sales, and the increased expenditures to support coal plants which had experienced unplanned downtime and outages in the last year.
"We are not happy with the performance of our fleet." "I think it's quite clear," said Chief Operation Officer Markus Brokhof.
RBC Capital Markets' Gordon Ramsay stated that the results missed his expectations due to higher than expected costs and margin compression within its electricity and natural gas portfolio, and that the guidance "disappointed".
AGL expects a net profit of between A$500 and A$700 millions for the fiscal year ending June 30 2026. The median of the range is 10% lower than the average A$667 Million net profit estimate from nine analysts surveyed by LSEG.
Jamie Hannah, the deputy head of investment at VanEck, one of AGL's top 15 shareholders, was not deterred. He said the market's reaction was "out of sync with the company's medium- and longterm strategies".
Hannah explained that the company's softer performance was due to the fact it is in a period of transition as it prepares to switch to clean energy in 2035 and to exit coal power.
He said that because of the old coal plants, outages affect their ability to operate them. "But they also have to spend the money to build the next phase of energy generation. A lot of it is renewables."
AGL being one of the biggest players in Australia is obviously at the centre of that here. AGL is one of Australia's biggest companies and it is at the heart of this transition. ($1 = 1.5319 Australian dollars). (Reporting and editing by Muralikumar Aantharaman, Jamie Freed and Christine Chen. Additional reporting and editing by Shivangi lahiri in Bengaluru and Nichiket Sonil in Sydney.
(source: Reuters)
