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FIRST CUT: Contact lifts first-half underlying profit by 12%, cuts capex as sales fall

Monday 13th February 2017

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Contact Energy posted a 12 percent gain in first-half underlying profit while holding its dividend unchanged and trimming capital expenditure in the face of weaker sales.

Underlying profit rose to $82 million in the six months ended Dec. 31, from $73 million a year earlier, the Wellington-based company said in a statement. Sales fell to $1.04 billion from $1.12 billion. Net income was $96 million compared with a loss of $116 million a year-earlier, which reflected impairments.

Sales were in line with a forecast from brokerage Forsyth Barr, which had expected normalised profit of $79 million in a period of subdued electricity demand. National electricity demand declined by 2 percent in the first half, which Contact said reflected reduced residential consumption and lower irrigation demand as warmer temperatures and above-average rainfall boosted hydro-electric generation.

It will pay a first-half dividend of 11 cents, in line with the year earlier. Expenses fell to $778 million from $866 million, while capex dropped 11 percent to $63 million. Its gearing ratio fell to 36 percent from 37 percent.

"Contact's strategy remains centred on optimising the customer and generation businesses to deliver strong cash flows which are ultimately for distribution to shareholders," Contact said. "We expect our operational improvement initiatives to continue to reduce our costs."

Contact shares last traded at $4.79 and have gained 15 percent in the past 12 months.

BusinessDesk.co.nz

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