Companhia Paranaense de Energia ELP or COPEL reported net earnings of R$389.8 million ($123.4 million) in third-quarter 2017 versus net loss of R$75.1 million ($23.1 million) incurred in the year-ago quarter.
The bottom-line results were driven by higher revenues, rise in financial income and growth in operational income, partially offset by higher operating costs and expenses.
Earnings per share came in at R$1.40 or 44 cents per American Depository Receipt (ADR), significantly above loss of R$0.32 or 10 cents per ADR in the year-ago quarter.
Revenues
COPEL’s net operating revenues in the quarter were R$3,643.7 million ($1,153.1 million), reflecting year-over-year growth of 25%.
The top-line improvement was primarily driven by growth of 11.8% in electricity sales to final customers, 16.7% in electricity sales to distributors, 57.9% in sales derived from use of main distribution and transmission grid and 29.3% in revenues from telecommunications.
However, these positives were partially offset by a decline of 45.6% in construction revenues, 56.9% in fair value of assets from the indemnity for the concession, 1.1% in sales derived from distribution of piped gas and 9.9% in other operating revenues.
Electricity Sales
COPEL’s electricity sales to final customers include Copel Distribuicao’s sales in the captive market and Copel Geracao e Transmissao’s sales in the free market.
The company’s electricity sales to final customers inched up 0.8% year over year to 6,302 gigawatt hours in the quarter. The improvement was driven by 3.6% growth in Residential consumption segment, 5.1% in Rural and 2.7% in Other segment, partially by 2.2% fall in Industrial segment. Commercial segment’s sales were flat year over year.
Expenses/Income
COPEL’s operating costs and expenses in the quarter increased 15.8% year over year to R$3,159.7 million ($999.9 million). Expenses, as a percentage of revenues, were 86.7% compared with 93.6% in the year-ago quarter.
The company recorded an increase of 66.8% in costs. This was due to electricity purchased for resale, rise of 3.1% in personnel and management costs, 39.9% costs related to materials and supplies for power electricity, 21.1% in natural gas and supplies costs for the gas business, 2.2% in materials and supplies costs, 1.6% rise in depreciation and amortization and 46.8% surge in other costs and expenses.
However, the impact of higher costs and expenses was partially offset by a decline of 15.1% in charge of the main distribution and transmission grid, 12% in costs related to pension and healthcare plans, 1% in third-party services costs and 49.4% fall in construction costs.
Adjusted earnings before interest, tax, depreciation and amortization (EBITDA) were R$485.6 million ($153.7 million), down 25.9% year over year. Adjusted EBITDA margin was 13.3% in the quarter.
Balance Sheet & Cash Flow
Exiting the third quarter, COPEL had cash and cash equivalents of R$1,305.4 million ($413.1 million), down from R$1,423.9 million ($443.6 million) at the prior-quarter end. Loans, financing and debentures decreased 4.2% sequentially to R$6,249.3 million ($1,977.6 million).
In the first nine months of 2017, the company generated net cash of R$1,184.2 million ($373.6 million) from its operating activities, reflecting a decline of 10% from the year-ago period. Capital used for addition of property, plant and equipment totaled R$753.4 million ($237.7 million), down 19.7% year over year.
During the period, the company distributed approximately R$203.8 million ($64.3 million) as dividends and interest on equity.
Outlook
For 2017, COPEL plans to use R$2,331.3 million in capital expenditures (revised down from R$2,877 million in September). Of the total, roughly R$1,024.5 million will be used for the Generation and Transmission business, R$559.2 million for the Distribution business and R$200.3 million for the Telecommunications business. The rest will be utilized for improving other businesses.
Companhia Paranaense de Energia (COPEL) Price
Companhia Paranaense de Energia (COPEL) Price | Companhia Paranaense de Energia (COPEL) Quote
Market Capitalization & Key Picks
COPEL currently has a $1.9 billion market capitalization. Some major players in the industry are Consolidated Edison Inc. ED, Atlantic Power Corporation AT and DTE Energy Company DTE. All these stocks carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Consolidated Edison’s earnings expectations for 2018 have improved over the past 60 days. Its earnings are predicted to grow 3% in the next three to five years.
Atlantic Power pulled off an average positive earnings surprise of 29.21% for the last four quarters. Bottom-line estimates for 2017 and 2018 have improved in the last 60 days.
DTE Energy delivered an average positive earnings surprise of 3.81% in the last four quarters. Also, earnings expectations for the stock improved for 2017 and 2018 in the last 60 days.
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