Eon earnings expected to fall by 16 per cent

Eon is expected to announce a 16 per cent decline in earnings over the first half of this year as low commodity prices and continued uncertainty over cash flows drags on the German energy giant’s performance.

The Eon UK parent company will release its H1 financial results on Wednesday morning but analysts are already braced for a consensus EBITDA of just €4.2 billion, down 16 per cent from the previous half year results with adjusted earnings per share down 20 per cent to 59 cents.

The weaker financial results follow the company’s radical decision earlier this year to spin off the profit-hemorrhaging centralised generation assets into a separate company, Uniper, and focus on its customer-facing business.

Analysts at RBC Capital said in an investor note on Tuesday that although the spin-off plans are viewed in a positive light by the market, financial pressures will remain until the new structure is announced in May next year.

“[I]n the meantime continued weakness in power prices and uncertainly over cashflows and nuclear liabilities may continue to act as a drag,” the investor note said.

Recent news reports suggest that the German government may look to increase the legal certainty for nuclear liabilities during company reorganisations, which RBC Capital says may extend Eon’s liability for more than the current period of five years once nuclear assets are spun off into Uniper.

“Plus the German government is also stress testing provision levels with results due in the autumn that may require cash to be offset against the liabilities which are currently largely unfunded,” the analysts added.

Eon’s share price has trended downward for the past three trading sessions, slipping from 12.34 cents on Thursday 6 August to just below 12 cents on Tuesday morning.

The company’s financial results are expected to be released on Wednesday morning at 06.30 BST.