What Happened to the AGL Share Price?
AGL Energy [ASX:AGL] picked up 3.18% to AU$14.92 by 1.36pm today. The ASX was lower after majors such as CSL and Suncorp released poor results. The falling oil price overnight also pulled down the energy sector. AGL, Australia’s top power generation and distribution company, however, was up on the back of better than expected financial results.
Why Did This Happen to AGL Shares?
The gain in share price was mainly due to the company’s strong result for H1. Net profit jumped 18%in the six months ending on December 31st to AU$308million. The result was aided by last year’s acquisition of Macquarie Generation. The NSW power producer was bought at AU$1.5billion.
The wholesale gas segment produced a higher margin, while the company faces stiff competition in the retail space. ‘It’s a great result but you’ve still got average electricity demand in the consumer market down 4.4 per cent’, outgoing chief executive Michael Fraser said.
Despite losing AU$87 million due to the repeal of the carbon tax, the company managed to produce an underlying profit of AU$302 million. This beat several brokers’ forecasts.
What Now for AGL?
The contribution from Macquarie Generation offset the impact of the repeal of the carbon tax, as well as the loss of financial assistance to the Loy Yang coal-fired plant. Mr Fraser explained that a better winter and a profitable wholesale gas portfolio all contributed to the final results.
AGL has retained its guidance for the full year between AU$575 million to AU$635 million. The company expects the underlying profit in the second half to be approximately the same as the first half.
The upstream business will continue to be a problem for the company. The drop in crude oil price and its associated impact on gas price will make it difficult for AGL to recover its book value of assets in that segment.
Emerging Market Analyst, New Frontier Investor