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Companhia Paranaense de Energia (ELP - Analyst Report), also known as COPEL, reported its financial results for the first quarter 2013 on May 16, 2013. The company’s net income in the quarter increased 24.7% year over year to R$398.7 million (US$199.4 million). COPEL’s earnings per share came in at R$1.46 or US$0.73 ADR. This compares favorably with US$0.66 per ADR reported in the year-ago quarter and the Zacks Consensus Estimate of US$0.72 per ADR.

Revenue

COPEL reported a 17.6% year over year increase in its net operating revenues that settled at R$2,380.4 million (US$1,190.2 million) in the quarter.

Revenue improvement was witnessed in almost all the business categories of COPEL: Electricity sales to final customers grew 26.8%; sales to distributors surged 72.1%; telecommunications revenue increased 6.0%; distribution of piped gas spiked 13.4%; construction revenue rose by 72.2% and other operating revenues shot up 93.5%. An exception to these was a 31.5% decline in revenue generated from the use of main transmission.

Expenses/Income

In the first quarter 2013, operating costs and expenses soared 19.1% year over year and settled at R$1,882.0 million (US$941.0 million), due primarily to higher expenses in the following categories: 39.5% rise in electricity purchased for resale, 6.3% in personnel and management expenses, 5.8% in pension and health plans, 17.1% in materials and supplies, 25.1% in natural gas and supplies for the gas business and 88.5% in construction costs, among others.       

Higher costs in the above-mentioned categories were partially offset by an 11.7% decline in expenses related to the use of main transmission grid, 16.0% in materials and supplies for power, and 71.2% fall in provisions and reversals.

EBITDA increased 10.4% to R$664.9 million (US$332.5 million) with an EBITDA margin of 27.9% versus 29.7% in the year-ago quarter.

Balance Sheet

Exiting the first quarter 2013, COPEL had cash and cash equivalents balance of approximately R$1,206.1 million (US$597.1 million), down 17.3% sequentially. Also, loans and financing balance plummeted 8.7% to R$2,728.1 million (US$1,350.5 million).

Cash Flow

COPEL in the quarter used cash flow of R$8.6 million (US$4.3 million) from operating activities as against cash flow generation of R$46.2 million (US$26.1 million) in the year-ago quarter. Capital spending on the purchase of property, plant and equipment was R$10.2 million (US$5.1 million), reflecting a 95.3% decline from the year-ago quarter.

For the year 2013, COPEL plans to spend approximately R$1,922.8 million, with roughly 45.1% on Generation and Transmission, 51.3% on Distribution and 3.6% on Telecommunications.

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 Paraná controls about 58.6% of the shares of COPEL. The stock currently bears a Zacks Rank #5 (Strong Sell).

Stocks to watch out for in the industry are CPFL Energia S.A. (CPL - Snapshot Report) and Empresa Nacional de Electricidad S.A. (EOC - Snapshot Report), each with a Zacks Rank #1 (Strong Buy) while ALLETE, Inc. (ALE - Snapshot Report) holds a Zacks Rank #2 (Buy).
 

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