Origin Energy Ltd (ASX: ORG) is an integrated energy company focussed on oil and gas exploration and production, power generation and energy retailing in Australia. In fact, Origin controls about one third of the Australian energy retailing market. Its market capitalisation is A$12.9 billion.
What is the FY19 result?
Today (Thursday 22 August 2019), Origin released its FY19 results. The main points are as follows:
- Underlying EBITDA of A$3,232 million, up 16 per cent.
- Underlying profit of A$1,028.9 million, up 42 per cent.
- Underlying EPS of 58.4 cents, up 42 per cent.
- Final dividend of 15.0 cents per share (fully franked). This makes the total dividend for FY19 of 25.0 cents per share. This compares with no dividend in FY18.
The key features of the results are as follows:
- The main driver of higher earnings in FY19 was an increased underlying EBITDA for the Integrated Gas business of 51 per cent to $1,892 million. This outcome is mainly due to an increase of 40 per cent in the average realised liquefied natural gas export price and lowers costs.
- Underlying EBITDA in Energy Markets was $1,574 million, a decline of 5 per cent from FY18. Electricity EBITDA was down 10 per cent due to price relief measures and competition resulting is in higher discounting. Gas EBITDA was up 10 per cent with volumes and margins increasing.
What is the outlook?
Origin provides guidance in respect of its two business units rather than guidance for the total company.
- Energy Markets underlying EBITDA guidance for FY20 is $1,350 to $1,450 million compared with $1,574 million in FY19. The gross profit of the natural gas portfolio is expected to be relatively stable, while it is estimated that there will be a reduction in electricity gross profit reflecting the impacts of government default market offers ($100 million), lower green scheme prices flowing through to business customer tariffs and lower customer usage.
- In respect of the Integrated Gas business, LNG production and capital expenditure in FY20 is expected to similar to FY19 levels.
What is the market’s reaction?
Today (Thursday 22 August) Origin is trading at around A$7.45, up around 3.5 per cent. This suggests that the FY19 result was slightly better than expectations. Origin trades at a P/E ratio of around the mid-teens and an annual dividend yield of around2.5 per cent (fully franked).
This article has been prepared by the Australian Stock Report Pty Ltd (AFSL: 301 682. ABN: 94 106 863 978)
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