Fortum's Q2 profit drops as German unit hit by rising costs

Fortum owns 76% of Uniper

  
The German share price index DAX graph is pictured at the stock exchange in Frankfurt, Germany, February 18, 2020.

The German share price index DAX graph is pictured at the stock exchange in Frankfurt, Germany, February 18, 2020.

REUTERS/Staff

HELSINKI - Finnish energy company Fortum on Tuesday posted a sharp drop in second-quarter operating profit roughly in line with expectations after its German subsidiary Uniper was hit by rising costs.

Shares in Fortum, the largest Finnish company by revenue, fell 2.5% following the results.

Fortum said its April-June comparable operating profit fell to 35 million euros ($41 million) from 203 million euros a year earlier, slightly above the 23 million euro mean estimate by eight analysts in a company-provided poll.

Fortum owns 76% of Uniper, which last week posted a 16% year-on-year drop in second-quarter comparable operating profit, citing rising prices for energy commodities and carbon permits.

Inderes analyst Juha Kinnunen said results of Fortum's largest unit Uniper should remain bleak in July-September but improve towards the end of the year when hedging runs out and demand for electricity increases.

"At both companies, the operational result should be significantly better due to seasonality," Kinnunen said.

Fortum's second-quarter sales were 17.1 billion euros, missing the average forecast of 19.0 billion, but still within the wide range of estimates of 15.7 billion to 20.4 billion.

The company in which Finland owns 50.8% stake announced a new strategy in December, saying it aimed to divest its retail businesses and become carbon neutral by 2050.

The deadline prompted several environmental organisations to urge the Finnish government to push for a faster exit from coal.

"We have been able to announce the accelerated closure of almost 40% of our coal-fired generation capacity within less than one year," Chief Executive Markus Rauramo said in a statement.

Reuters reported in May that Uniper has held talks with Russia's InterRAO on sale of its coal-powered plants in Russia, citing sources. 

"It would likely turn into a lengthy process, with interest limited to local operators, in our view," Credit Suisse analysts said in a note.

($1 = 0.8497 euros)

(Reporting by Essi Lehto and Tarmo Virki; Editing by Kirsten Donovan and David Evans) ((Essi.Lehto@thomsonreuters.com; +358505412375;))


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