AGL’s Share Price Tumbles Despite 194% Increase in Net Profit

agl Energy share price decrease

AGL Energy’s [ASX:AGL] share price has fallen a further 1.75% in trading today, despite better than expected profit results for the 2018 financial year.

AGL’s shares are currently trading at $20.74, down 15.48% since the beginning of the year.

The energy retailer released its full year results for 2018 yesterday, revealing a net profit of $1.6 billion, up 194% from the previous year of $539 million. In addition, the company’s full year dividend rose by 29%, to $1.17 per share.

If AGL’s FY18 results we’re so great, why did their share price drop?

Despite the better than expected results for 2018, investors were not impressed by yesterday’s announcement. With the company’s 2019 guidance looking rather ordinary, concerns seem to be high for AGL’s future earnings.

The company stated that with power prices easing, earning momentum is slowing. Underlying profit after tax for 2019 is expected to be between $970 million and $1,070 million, including $120 million of cost cuts.

While wholesale electricity prices have already begun to fall over the past 12 months, policy certainty is key to encouraging the additional generation supply that will place further downward pressure on prices and benefit consumers over time,’ said Andy Vesey, CEO of AGL.

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What is AGL doing to ensure long-term success?

Mr Vesey acknowledged that many Australian households are facing cost-of-living pressures as a result of higher energy bills and confirmed that AGL has plans to address the issue.

We are investing to create new supply in the market. AGL and our partners are currently developing 1,215 megawatts of new generation capacity, representing investment of more than $2 billion, more than any other company in Australia. This includes Australia’s largest wind farm at Coopers Gap in Queensland, a new dual-fuel power station at Barker Inlet in South Australia and, in New South Wales, an expansion of our Bayswater coal-fired power station, development of a new gas-fired power station at Newcastle, and the Silverton Wind Farm.

AGL also announced the launch of a hardship program to assist vulnerable customers, including $50 million of hardship debt relief and loyalty discounts for customers who have been with the company more than two years.

There is no doubt that AGL is heading for some tough times ahead, however their approach to the situation is definitely admirable. Investors should really give them more credit.

Regards,
Matt Hibbard,

For Money Morning

PS: You’ll find over 2,000 stock listed on the ASX and on any given day a bunch will rise or fall, just like AGL. It’s near impossible to monitor these on your own. Our analyst Sam Volkering has picked out four Aussie stocks he believes could be top performers in 2018. Check out his free report ‘The Four Best ASX Stocks for 2018’.

Matt Hibbard

Matt Hibbard

Editor at Total Income

With nearly three decades in the markets, Matt has traded just about every asset class there is. The one thing that has stuck with him over this time is a very simple premise. That is, it’s the cash a company generates that ultimately determines its value.

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