Companhia Paranaense de Energia – COPEL ELP reported weak results in the first quarter of 2018. The Brazilian utility’s net income decreased 18.6% year over year to R$ 339.6 ($ 104.5 million).
The company’s earnings per share were R$ 1.21, down 19% from the year-ago tally of R$ 1.50. The American Depository Receipt (ADR) equivalent for the reported quarter was 37 cents while earnings in the year-ago quarter were 48 cents.
Revenues Improve Y/Y
In the quarter under review, COPEL’s net operating revenues were R$ 3,348.7 million ($ 1,030.4 million), increasing 1.6% year over year.
The top-line improvement was primarily driven by growth of 16.3% in electricity sales to final customers and 23.8% in revenues from telecommunications. However, these positives were partially offset by a decline of 14.7% in electricity sales to distributors, 32.6% in sales derived from the use of main distribution and transmission grid, 9.5% in construction revenues, 3.8% in sales derived from the distribution of piped gas and 7.7% in other operating revenues.
Electricity Sales Improve Y/Y
The company sells electricity to its final customers in the captive market through Copel Distribuicao and in the free market through Copel Geracao e Transmissao.
In the first quarter, COPEL’s electricity sales to final customers increased 1.2% year over year to 6,399 gigawatt hours. The improvement was driven by 9.6% rise in Industrial and 0.3% growth in Rural consumption segments. However, this was partially offset by 2.6% fall in Residential, 3.4% in Commercial and 1% in Other consumption segments.
Margin Profile Weak on Rise in Costs and Expenses
In the quarter under review, COPEL’s operating costs and expenses increased 11.1% year over year to R$ 2,786.6 million ($ 857.4 million). It represented 83.2% of net operating revenues versus 76.1% in the year-ago quarter.
Increase in operating costs and expenses was due to the rise of 10.6% in costs related to electricity purchased for resale, 86.1% in charge related to the main distribution and transmission grid, 27.5% in personnel and management costs, 3.2% in costs related to pension and healthcare plans, 71.8% in costs related to materials and supplies for power electricity, 10.2% in third-party services costs and 17.6% in provision and reversals.
However, the impact of higher costs and expenses was partially offset by a decline of 1.9% in costs related to materials and supplies, 6% in costs for natural gas and supplies in the gas business, 3.2% in depreciation and amortization, 23.6% in construction costs, and 21.2% in other costs and expenses.
Adjusted earnings before interest, tax, depreciation and amortization (EBITDA) were R$ 863.1 million ($ 265.6 million), inching up 0.3% year over year. Adjusted EBITDA margin was 25.8% in the quarter under review versus 26.1% in the year-ago quarter.
Balance Sheet & Cash Flow
Exiting the first quarter, COPEL’s cash and cash equivalents were R$ 1,697.5 million ($ 514.4 million), increasing 63.2% from R$ 1,040.1 million ($ 314.2 million) at the prior-quarter end. Loans, financing and debentures grew 5.5% sequentially to R$ 7,822.2 million ($ 2,370.4 million).
In the reported quarter, the company generated net cash of R$ 641.4 million ($ 197.4 million) from its operating activities, reflecting year-over-year growth of 50.1%. Capital used for the addition of property, plant and equipment surged 154.7% year over year to R$ 503.3 million ($ 154.9 million).
During the quarter under review, COPEL distributed approximately R$ 2 million ($ 0.6 million) as dividends and interest on equity.
For 2018, COPEL plans to use R$ 2,928.6 million in capital expenditures. Of the total, roughly R$ 743.6 million will be used for the Generation and Transmission business, R$ 790 million will be used for the Distribution business and R$ 340.2 million for the Telecommunications business. The rest will be utilized for improving other businesses.
Companhia Paranaense de Energia (COPEL) Price
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