Origin Energy Share Price Drops 7% on Lower Guidance (ASX:ORG)

Origin Energy Ltd [ASX:ORG] is at time of writing today’s worst performer from the ASX 200 after updating their FY2021 guidance.

The ORG share price fell after lowering their full-year EBITDA guidance to between $1 billion and $1.14 billion instead of the previously announced $1.15 billion to $1.3 billion.

What happened?

Origin had to update their guidance after the pandemic and a mild summer affected demand.

Origin expects electricity gross profits to be down between $250 million and $290 million year-on-year, a larger number than the previous $170 million and $220 million guidance.

As Origin explained:

This reflects lower wholesale prices flowing into retail tariffs and recent business sales recontracted at lower than expected prices, a one-off increase in network costs that could not be recovered in retail tariffs ($40 million, unchanged) as well as the impacts of mild summer conditions on demand and volatility.

Natural gas gross profits are also expected to drop more than earlier forecasts. Instead of $100–150 million from earlier guidance, numbers are now expected to be down between $200 and $250 million year-on-year.

This is mainly because of the roll off of legacy sales contracts, lower volume of business sales and repricing of tariffs.

Origin expects that better LPG performance will offset some of those drops though.

What could happen next for the Origin Energy share price?

Investors weren’t impressed. Share prices fell more than 6.9% at time of writing and were trading at $4.62. Origin has had a challenging 12 months with share prices dropping more than 40% in the period.

Origin’s CEO Frank Calabria remained positive though:

Origin has two leading businesses with high quality assets and resources. We remain very focused on maximising value from the existing businesses and pursuing growth in customer value and low carbon solutions, which puts Origin in an ideal position to lead, and capture value, from the energy transition.

The company said last year that the pandemic had accelerated the energy transition and that they would be investing more into renewable energy and storage.

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Selva Freigedo


Selva Freigedo is an analyst at Money Morning. She has a background in financial economics, but what makes Selva´s experiences different to many are the places she has lived and worked. Born in Argentina, she has also lived in Brazil, the US, Spain, and now Australia. She has seen up close many of the economic phenomena that worry Fat Tail Investment Research readers, like hyperinflation, bank bail-ins and governments burdened with so much debt it cannot possibly be repaid.

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