Companhia Paranaense de Energia (ELP) or COPEL reported disappointing third-quarter 2014 results. Net income came in at R$233.4 million (US$102.8 million), down 14.5% year over year. Earnings were R$0.40 per share or 18 cents per American Depository Receipt (ADR).
Revenue
COPEL generated revenues of R$3,286.9 million (US$1,448 million), increasing 45.8% year over year.
The top-line improvement was driven by sales increase in the following categories: 39.5% in electricity sales to final customers, 134.8% in electricity sales to distributors, 14.5% in use of the main distribution and transmission grid, 37.3% in construction and 18.3% in telecommunications. However, these were partially offset by 15.9% and 39.8% decline in revenues generated from distribution of piped gas and other sources, respectively.
Electricity Sales
COPEL’s electricity sales to final customers improved 3.1% year over year to 5,870 Gigawatt hours (GWh) in third-quarter 2014. The rise was prompted by a 0.9% increase in the Residential segment, 4% in Industrial, 5.7% in Commercial, 2.3% in Rural and 2.1% in Other segment.
Electricity sales to final customers include Copel Distribuição’s sales in the captive market and Copel Geração e Transmissão’s sales in the free market.
Expenses/Income
COPEL’s operating costs and expenses soared 51.7% year over year to R$2,980.8 million (US$1,313.1 million). As a percentage of revenues, it came in at 90.7% as against 87.1% in the year-ago quarter.
The company recorded steep increases of 623.7% in cost of materials and supplies for power electricity, 335.3% in natural gas and supplies for the gas business and 664.3% in provisions and reversals.
Additionally, higher costs were reported in the following categories: 57.3% in electricity purchased for resale, 63.5% in charges of the main distribution and transmission grid, 36.3% in construction costs and 22.7% in materials and supplies.
Earnings before interest, tax, depreciation and amortization (EBITDA) improved 7% to R$495.8 million (US$218.4 million) with an EBITDA margin of 15.1% versus 20.5% in the year-ago quarter.
Balance Sheet
Exiting third-quarter 2014, COPEL had cash and cash equivalents of R$1,790.1 million (US$736.7 million), down 3.2% from R$2,063.5 million (US$938 million) at the previous quarter-end.
Loans, financing and debentures declined 7.4% sequentially to R$4,396.4 million (US$1,809.2 million) from R$4,745.4 million (US$2,157 million) in the previous quarter.
Cash Flow
In the nine months ended Sep 2014, COPEL generated net cash of R$1,217.5 million (US$529.3 million) from its operating activities, down 1.8% from the prior-year comparable period. Capital spending on the purchase of property, plant and equipment shot up 150.1% over the year-ago period to R$639.6 million (US$278.1 million).
During the period, the company distributed approximately R$249.8 million (US$108.6 million) as dividends and interest on equity.
Outlook: In 2014, COPEL plans to spend R$2,616.7 million as capital expenditure. Of the total amount, roughly R$1,309 million will be used for the Generation and Transmission business, R$895.9 million for the Distribution business, R$80.0 million for the Telecommunications business and R$331.8 million as investments in new businesses.
With a market capitalization of $3.4 billion, COPEL presently carries a Zacks Rank #3 (Hold). Some better-ranked stocks in the electric utility industry include Black Hills Corporation (BKH), The Empire District Electric Company (EDE) and Unitil Corp. (UTL). All these stocks sport a Zacks Rank #1 (Strong Buy).
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
To read this article on Zacks.com click here.
Get all Zacks Research Reports and be alerted to fast-breaking buy and sell opportunities every trading day.
Be the first to comment