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BusinessDesk
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Photo / Alan Gibson.
Genesis Energy, New Zealand's largest energy retailer, cut its forecast for annual earnings after losing electricity and gas customers amid increased competition and as wholesale electricity prices declined. The shares dropped after the announcement.
Earnings before interest, tax, depreciation, amortisation and other fair value changes will be between $330 million and $345 million in the year ending June 30, the Auckland-based company said in a statement. That's lower than its $363.4 million prospectus estimate from March last year. Net income is expected to be between $85 million and $95 million, compared with its prospectus estimate $95.4 million, it said.
Read more:
• Electricity companies' shares losing spark but reasons aren't obvious
• Genesis Energy lifts earnings 15pc
Shares in Genesis Energy are the fourth-worst performer on the NZX 50 benchmark index in the past month, declining 6.5 per cent. The company warned when reporting first-half earnings in February that it faced headwinds of weaker global oil prices and aggressive competition for customers that would make it a stretch to reach its full-year earnings target. The stock fell 4.6 per cent to $2.06 today.
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"The headwinds to Genesis Energy's financial performance reported at the half year have now, however, begun to crystalise, leading the company to revise its earnings guidance for FY2015," the company said. "Competition for electricity and gas customers remained elevated over the three-month period ended March 31 2015 as Genesis Energy experienced a reduction in both electricity and gas customers."
During the three months ended March 31, Genesis Energy lost 0.3 per cent of its electricity customers, taking the total to 516,167. Its gas customers reduced 1.3 per cent over the quarter to 106,781, it said.
Third quarter total retail electricity sales volumes were 2 per cent lower than the year earlier period, as mass market volumes declined 5 per cent, due to a 3 per cent drop in electricity customer accounts and a 2 per cent drop in electricity usage per customer, it said.
The company's mass market gas volumes dropped 8 per cent compared with the same quarter a year earlier due to lower gas customers and reduced usage per customer, it said.
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Genesis said it expects to pay a full-year final dividend of 8 cents per share in October, in line with its prospectus.
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I've spent years immersed in the energy sector, analyzing market trends, company performances, and the intricate interplay of factors affecting these entities. In the case of Genesis Energy, the details point to a dynamic landscape, influenced by various factors:
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Earnings Forecast Revisions: Genesis Energy revised its annual earnings forecast due to multifaceted challenges. The decrease in earnings stemmed from intensified competition and a shift in wholesale electricity prices.
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Financial Metrics: The company's performance metrics like EBITDAF (Earnings Before Interest, Tax, Depreciation, Amortisation, and Fair Value Changes) and net income, originally estimated in the prospectus, were adjusted downward. This often reflects market pressures and operational challenges.
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Market Performance: Shares of Genesis Energy declined notably, ranking among the poorest performers on the NZX 50 benchmark index. Factors contributing to this decline included weaker global oil prices and aggressive competition, impacting the company's ability to meet its full-year earnings target.
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Customer Dynamics: The company faced challenges retaining both electricity and gas customers, experiencing reductions in customer numbers for both segments. Reductions in customer accounts and usage per customer impacted sales volumes significantly.
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Dividend Outlook: Despite the challenges, Genesis Energy maintained stability in its dividend policy, aligning with the initially proposed dividend per share outlined in its prospectus.
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Market Response: The stock market reacted adversely to the revised forecast, with shares dropping after the announcement, emphasizing the impact such adjustments can have on investor sentiment and stock performance.
The intricate dance of factors affecting Genesis Energy is emblematic of the energy sector's volatility and the ongoing battle among market players for market share and profitability. It underscores the critical importance of adaptability and strategic agility for companies navigating such an environment.
