RWE posts double-digit increase in operating result

RWE posts double-digit increase in operating result
8 January 2002 - Preliminary key figures for the 2002 financial year (January 1 through December 31) published today by RWE show 2002 as a successful year for the German multi-utility.

Despite the weak economy and substantial earnings shortfalls recorded by its non-core businesses, the RWE Group will increase its operating result by at least 12 per cent, lifting it clearly above €4bn. The sharp rise was driven by core businesses, which boosted operating results by at least 30 per cent. Among the main contributing factors were the inclusion of the UK energy utility Innogy and the Czech gas activities as well as the sustained upward trend in the German electricity business.

Electricity: Significant rise in earnings through acquisition of Innogy, cost-cutting and profit-oriented sales

More than half of the Group operating result was generated by the Electricity Business Area, which produced more than 45 per cent growth. Earnings would have advanced at least 25 per cent, even without including Innogy. This development was due to the rise in wholesale prices, the successful continuation of the cost-cutting program, and the profit-oriented sales policy.

If the US hard coal and gas producer CONSOL had not suffered a cyclically-induced decline in earnings, the Electricity Business Area would have posted a much stronger surge in its operating result.

RWE's Gas and Water Business Areas also posted double-digit increases in earnings. By contrast, the Environmental Services Business Area saw its operating result slip by more than one-third. This is principally due to the tremendous increase in pressure on margins in light of the fiercer competition on Germany's waste-disposal market.

Net profit reflects external growth and negative one-off charges.

Net profit was affected by substantial burdens, including scheduled goodwill amortization and financing costs associated with acquisitions as well as the weak performance displayed by non-core businesses. There were also far-reaching one-off charges in the form of restructuring reserves built in view of the business downturn in the Environmental Services Business Area and at Heidelberger Druckmaschinen, the market-induced devaluation of RWE's stake in HOCHTIEF, and lower results from securities. However, these effects were largely offset by the book gain on the divestment of the company's stake in Shell & Dea Oil. Net profit before goodwill amortization was slightly up on the previous year's pro forma net profit of €1799m, but was some 22 per cent down on last year's pro forma net profit of €1350m after goodwill amortization.

Sales generated by core businesses up 27per cent year-on-year.

RWE's core businesses lifted sales by 27 per cent principally due to the inclusion of Innogy and the Czech gas activities. Group sales were about 6 per cent down on the year-earlier level. The company was unable to fully compensate for the considerable decrease in sales produced by non-core businesses owing to the sale of its shareholding in Shell & Dea Oil as well as the deterioration of Heidelberger Druckmaschinen's operating situation. For the first time, gross volumes from the energy trading business have been excluded from RWE's sales figures for the year under review and the previous year. Sales now only include trading margins (net values). Consequently, reported sales were lowered by some €7.3bn in the year under review and by about €2.5bn in the previous year. The disclosure of net figures provides for a more realistic presentation of the company's sales performance.

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