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Utility GDF Suez sees profit fall 60 per cent, braces for continued slowdown in Europe

By: Sarah Dilorenzo, The Associated Press

Thursday, Feb. 28, 2013 at 3:18 AM | Comments: 0

PARIS - Growth in developing markets helped Franco-Belgian utility GDF Suez eke out revenue growth last year, but concerns over the economic outlook in Europe prompted the company to take a €2 billion ($2.6 billion) charge on its assets.

As a result, its net profit last year ended 60 per cent lower at €1.6 billion ($2.1 billion) from €4 billion in 2011. Without the charge and only counting recurring operations, the company said Thursday its profit would have been €3.8 billion.

The fall in profits masked a 7 per cent increase in revenues to €97 billion ($127 billion). That was significantly above the €93.5 billion consensus in markets and sent the company's stock soaring 2.9 per cent when the Paris bourse opened Thursday.

Much of that revenue growth was in Asia and the Middle East, where revenues swelled 23 per cent. Of the projects the company commissioned last year, 90 per cent of the power capacity was in what it terms "fast-growing markets," like Thailand, Peru and Brazil.

Its French business also saw a jump — of 15 per cent — as it recoups money from customers after a state body struck down a government-imposed freeze on natural gas prices. The company estimated that it recouped €400 million from that decision. A bracing late winter and early spring as well as a chilly summer in France also boosted revenues.

But many of its European businesses are struggling, particularly its other home market of Belgium, where sales fell 6.6 per cent. The group took a €2 billion impairment on its European assets as part of its efforts to anticipate long-term economic malaise in the region. The economy of the 17 European Union countries that use the euro is in recession, and high unemployment and sluggish industrial output are hitting GDF Suez's business and retail customers.

The company said, however, that it was confident its strategy would allow it to ride out the poor outlook in Europe.

"In order to prepare for an economic climate that promises to be challenging in Europe for 2013 and 2014, the group has decided to accelerate its transformation, simplify its organization, and reduce its expenses, capex (capital expenditure) and debt," said CEO Gerard Mestrallet.

Still, the company is anticipating a drop in its net recurring income this year to between €3.1 billion and €3.5 billion.

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