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Mighty River Power profit jumps, beating prospectus, as sales fall

Wednesday 28th August 2013

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Mighty River Power posted a gain in full-year profit of almost 70 percent, beating its prospectus forecast in what is a credibility test for a company whose shares have languished since their listing in May.

Net profit was $114.8 million in the year ended June 30, up from $67.7 million a year earlier, the company said in a statement to the NZX. Sales fell 9 percent to $1.38 billion and the company's energy margin, which is sales excluding line and energy costs, shrank 6.3 percent to $678.3 million.

Sales, margin and operating earnings all beat the company's April prospectus forecasts, while showing a decline compared to 2012. Some of the biggest improvements compared to the year-earlier didn't come from operations. Fair value adjustments were up $67 million compared to 2012, the contribution from associate companies was an $87.7 million improvement.

The company will pay a final dividend of 7.2 cents a share on Sept. 30, with a record date of Sept. 11. Total dividends of 12 cents for the year amount to $168 million, in line with forecast and up from the $119.8 million it paid the government as sole owner a year earlier.

Earnings before interest, tax, depreciation, amortisation, fair value adjustments and equity accounted earnings fell to $390 million from $461 million a year earlier, reflecting one-off costs related to its international geothermal business and costs associated with the IPO, the company said.

Chairwoman, Joan Withers said 2013 was "an intensive year for our Company as we've made the transition from SOE to listed company, grown market share by adding value for our customers, and reported operating performance and financial results above forecasts."

Shares of Mighty River Power rose 1.8 percent to $2.23 and have fallen 16 percent since listing. The stock is rated a 'hold' based on the consensus of seven analysts surveyed by Reuters, with a median price target of $2.53.

Total generation fell 9 percent to 6,462GWh, which the company said was mainly due to lower hydro volumes, which were down 8 percent "as result of weak inflows into the Waikato catchments which were only 80 percent of average for the second half of the year."

Withers said the company "remains comfortable" with its prospectus forecasts for 2014, including "significant" growth in EBITDAF and an increase in annual dividends to 13 cents, reflecting the contribution from its new Ngatamariki geothermal plant and the absence of one-off costs it recognised in the 2013 financial year.

The company plans to update its guidance at the annual shareholders' meeting on Nov. 7.

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