Companhia Paranaense de Energia (ELP), also known as COPEL, reported its financial results for the second quarter of 2011. Net income in the quarter increased 2.4% year over year to R$257.5 million (US$161.9 million), or R$0.94 per share (US$0.59 per ADR). The year-over-year momentum was driven by higher revenues, which were partially offset by higher expenses in the quarter.
Revenue
In the second quarter, net operating revenues surged 13.5% year over year to R$1,842.3 million (US$1,158.7 million) due to higher sales volume.
Revenue increased on a year-over-year basis in all the categories mentioned below: 6.3% for Electricity sales to final customers; 3.3% for sales to distributors; 24.8% for use of main transmission grid; 20.3% for construction revenue; 23.7% for telecommunications revenue; 9.3% for distribution of piped gas, and 20.6% for other operation categories.
Expenses/Income
During the quarter, operating costs and expenses went up 11.8% year over year to R$1,513.5 million (US$951.9 million), due primarily to a rise in expenses in almost all the categories except for a 16.8% decline registered in material and supplies.
Among these, the company recorded a 5.9% increase in electricity purchased for resale, 19.4% hike in personnel and management and a 26.5% increase in raw material and supplies for electricity generation. Expenses for pension and health care plan went up by 25.8%.
EBITDA increased by 14.6% year over year to R$464.7 million (US$292.3 million) with an EBITDA margin of 25.2% versus 25.0% in the year-ago quarter.
Balance Sheet
Exiting the second quarter of 2011, COPEL's cash and cash equivalents plummeted 6.5% sequentially to R$1,676.3 million (US$1,067.7 million). Loans, financing and debentures, net of current portion surged 14.6% sequentially to R$1,461.8 million (US$931.1 million).
Cash Flow
Net cash flow from operating activities nearly doubled year over year in the quarter to R$251.6 million (US$158.2 million), while capital spending more than doubled to R$240.3 million (US$151.1 million).
For the fiscal year 2011, COPEL plans to spend approximately R$2,060.5 million, with roughly 49.7% on Generation and Transmission, 45.3% on Distribution and 5.0% on Telecommunications.
Companhia Paranaense de Energia is a fully integrated electric utility of Brazil engaged in the generation, transmission, and distribution of electricity to the State of Parana. The provincial government of the State of Parana controls 58.6% of the shares of COPEL. The company faces stiff competition from Cia Energetica de Minas Gerais (CIG) and Enersis S.A. (ENI).
We currently maintain a Neutral recommendation on the stock.
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