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LIGHTS are dim for ERM Power (ASX: EPW) today as the electricity provider posted a $30 million drop in profit, with its overall FY16 performance plugged to industry volatility.
Despite a revenue increase of 19 per cent to $2.7 billion overall, the Brisbane company saw a sharp 46 per cent fall in statutory net profit from $65.9 million in FY15 to the current $35.8 million figure.
While ERM's FY16 result may be less than glowing, Managing Director and CEO Jon Stretch says that it didn't come as a shock, citing shifted market conditions.
"The electricity retailing business in Australia has performed in line with our expectations," says Stretch.
"Electricity load was up 12 per cent to 18.1Twh on the prior year the growth we've seen has been somewhat offset by lower margins but we remain disciplined in pricing for profitable growth."
Statutory earnings before interest, tax, depreciation, amortisation, impairment and net fair value gains or losses on financial instruments designated at fair value through profit (EBITDAF) also fell 16 per cent to $72.7 million.
ERM largely puts this EBITDAF result down to a major shift for the flagship Oakey power station following the expiry of its offtake contract in 2014.
Based in the Darling Downs, the Oakey power station has now spent its first full financial year operating as a merchant facility.
Stretch says that the FY16 results aren't indicative of ERM's short term growth capacity, with a number of key investments, overseas contracts and diversification expected to boost the company before 2018.
"The FY16 result does not reflect the potential of the business or the progress made in transforming ERM Power," he says.
"FY16 saw the investment in the US business starting to bear fruit with substantial numbers of contracts secured at a good margin."
In the past year ERM acquired LED lighting company Lumaled in addition to software and data analytics company Greensense.
ERM shares opened this morning at $1.13, and are currently trading at a dipped $1.06.
Dividends have been declared at 6 cents per share.
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