ELP: Encouraging 1Q Results

Companhia Paranaense de Energia ( ELP - Analyst Report ) , also known as COPEL, reported its financial results for the first quarter of 2011. Net income in the quarter increased 20.5% year over year to R$384.8 million (US$231.8 million), or R$1.41 per share (US$1.70 per ADR). The year-over-year momentum was driven by higher revenues, which were partially offset by higher expenses in the year.

Revenue

In the first quarter, net operating revenues surged 11.3% year over year to R$1,826.2 million (US$1,100.1 million) due to higher sales volume.

Electricity sales to final consumers improved 3.2% year over year with residential sales soaring 3.6%, industrial sales increasing 3.2%, commercial sales rising 5.3% and rural sales climbing 3.2%.

Margins

During the quarter, operating costs and expenses went up 5.7% year over year to R$1,373.1 million (US$827.2 million), attributed to a 16.9% year-over-year increase in electricity purchased for resale, a 20.0% hike in materials and supplies, and a 19.3% increase in raw material and supplies for electricity generation.

Third-party service expenses soared 12.9% while costs for natural gas and supplies for the gas business were up by 1.0%. Expenses for pension and health care plan went up by 20.7%.

EBITDA increased by 21.8% year over year to R$587.2 million (US$353.7 million) with EBITDA margin of 32.1% versus 29.4% in the year-ago quarter.

Balance Sheet

Exiting the first quarter of 2011, COPEL's cash and cash equivalents plummeted slightly by 0.1% to R$1,791.9 million (US$ 1,092.6 million) from R$1,794.4 million (US$1,094.1 million) in the previous quarter. Loans, financing and debentures, net of current portion were down 0.4% sequentially to R$1,275.6 million (US$777.8 million) versus R$1,281.0 million (US$781.1 million) in the previous quarter.

Cash Flow

Net cash flow from operating activities inched down 0.2% year over year to R$195.8 million (US$117.9 million) in the first quarter of 2011 while capital spending jumped 185.5% to R$123.6 million (US$74.5 million).

Companhia Paranaense de Energia is a fully integrated electric utility of Brazil engaged in the generation, transmission, and distribution of electricity to the State of Paraná. The provincial government of the State of Parana controls 58.6% of the shares of COPEL. The company faces stiff competition from Cia Energetica de Minas Gerais ( CIG - Analyst Report ) and Enersis S.A. ( ENI - Snapshot Report ) .