EnBW group generates pre-tax profits in excess of one billion euro for the first time after just nine months

Karlsruhe. EnBW Energie Baden-Württemberg AG has successfully increased its sales revenue by 25.2 percent and earnings before taxes (EBT) by 13.6 percent in the first three quarters of fiscal year 2006 compared to the corresponding nine-month figures for the prior year. At 1,005.2 million euro, the EBT has for the first time in the history of EnBW exceeded the one-billion-euro threshold after just nine months. This excellent development of earnings is due above all to improved operating performance, optimisation of the value added chain, expansion of the consolidated group and the great success of the internal TOP FIT cost-cutting programme. Group net profit increased by 17.2 percent in the reporting period to 591.7 million euro. EnBW’s capital expenditures in the first nine months came to 336.0 million euro. This is an increase of 18.3 percent. At the end of the third quarter, EnBW employed a total of 20,232 staff, which is 13.9 percent more than as of year-end 2005.

"As of the end of the third quarter, we have already reached our ambitious target of long-term aggregated cost savings of one billion euro, and we have reached it faster and earlier than planned. This is not because the market has been kind to us – it is a result of the capabilities and performance of every one of our EnBW employees. Not only have we significantly improved all the key earnings ratios, on aggregate we have also exceeded our ambitious earnings targets once again," EnBW’s CEO Prof. Dr. Utz Claassen explained with regard to the quarterly figures published in Karlsruhe today.

The increase in sales revenue is due above all to the 19.8 percent rise in unit sales of electricity. In the first nine months of the current year, EnBW sold a total of 90.9 billion kilowatt hours of electricity. The fact that the higher gas procurement prices for EnBW’s gas companies could be passed on to consumers, albeit with a delay, also contributed to the increase in group sales. By comparison, higher electricity prices contributed only slightly to the increase in revenues. Although EnBW raised electricity prices by 4.5 percent in the standard rate as of July 1, 2006, it did not pass on the full burden from the market to its customers. EnBW’s net price guarantee for the standard rate until March 31, 2008 ensures that prices will remain stable for a period of 21 months.

Earnings before interest, taxes, depreciation and amortisation (EBITDA) rose on the comparative period of the prior year by 11.8 percent to 1.762 billion euro. Earnings before interest and taxes (EBIT) improved accordingly by 9.6 percent, reaching 1.154 billion euro. The regulatory impact and burdens from the reduction of network charges by the Federal Network Agency did not materially affect the earnings of the first nine months of 2006. This is because only some final notices have been issued to date and these were only effective for the months of August and September 2006.

The non-operating result of the EnBW group, which comprises extraordinary effects and effects relating to other periods, has declined. This is due to the recognition of provisions of 70 million euro and impairment losses of 66 million euro in the disposal area. These burdens were caused by decisions taken in the past and relate to the mechanical-biological treatment plants as well as the disposal contracts associated with them.

EBITDA adjusted for non-operating results grew 15.1 percent to 1.552 billion euro, the EBIT adjusted rose accordingly 20.6 percent to 1.010 billion euro, and the adjusted EBT 32.8 percent to 858.2 million euro. These figures reflect the marked improvement in the group’s operating performance.

The drop in the cash flow from operating activities recorded in the first half of 2006 due to outstanding trade receivables was fully compensated for in the third quarter of 2006 as expected. "The operating cash flow for the first nine months of 2006 totalled 1.172 billion euro, which means that it exceeded the figure for the comparative period by 20.4 million euro," says EnBW’s CFO Dr. Christian Holzherr. As a result of the planned increase in investing activities, free cash flow fell by 11 percent. Despite this, it still came to just under 1 billion euro.

Another positive development was the EnBW’s equity ratio: It went up by 14.7%; on a comparative basis, this is almost 2 percentage points up on year-end 2005.

CEO Claassen summarises the results of the third quarter as a whole as follows: "We have once again added another quarter to our success story. We are proud of this, and the figures are again excellent. Our strategic outlook is first-rate, too. Nevertheless, it has to be said that increasing regulatory influence and sometimes highly dubious attempts by the regulatory authorities to intervene are making life in the energy industry increasingly difficult for us and also unpredictable. We are ready to face this challenge in the interest of our customers, shareholders and employees."