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COPEL (ELP) Swings to Loss in Q3, Revenues Decrease Y/Y

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Companhia Paranaense de Energia (ELP - Free Report) or COPEL reported disappointing third-quarter 2016 results, recording net loss of R$75.1 million ($23.2 million) as against net earnings of R$91.4 million ($26 million) in the year-ago quarter.

Net loss per share came in at R$0.32 or 10 cents per American Depository Receipt.

 

 

Revenues

In the quarter, COPEL’s net operating revenues were R$2,907.2 million ($897.3 million), down 10.4% year over year.

The top-line weakness was triggered by a 24% decline in electricity sales to final customers and 8.9% to distributors, 21.5% decrease in revenue generated from use of the main distribution and transmission grid and 15.6% decrease in revenue from distribution of piped gas. This softness was partially offset by 28.2% growth in construction revenue, 15.7% growth in telecommunications revenue and 63% increase in other operating revenues.

Electricity Sales

COPEL’s electricity sales to final customers include Copel Distribuicao’s sales in the captive market and Copel Geracao e Transmissao’s sales in the free market.

The company’s electricity sales to final customers decreased 8.1% year over year to 6,253 Gigawatt hours in the quarter. The decline was led by 14.9% fall in Industrial, 11.5% drop in Commercial and 3.4% fall in Rural, partially offset by 1.1% increase in Residential and 0.8% hike in Other segment.

Expenses/Income

In the quarter, COPEL recorded operating costs and expenses of R$2,728.1 million ($842 million), down 14.3% year over year. Expenses, as a percentage of revenues, were 93.8% versus 98.1% in the year-ago quarter. The company recorded an 18.9% decline in costs related to electricity purchased for resale, 88.4% related to materials & supplies for power electricity, 5.9% fall in charges for the main distribution and transmission grid and 15.7% in other costs and expenses.

However, the impact of lower costs and expenses was partially offset by a 12.7% increase in costs related to personnel and management, 5.8% in pension and healthcare plans, 9.5% in third-party services, 15.7% in provisions and reversals and 23.6% in construction costs.

Adjusted earnings before interest, tax, depreciation and amortization (“EBITDA”) increased 92.7% to R$708.8 million ($218.8 million), with an EBITDA margin of 24.4%.

Balance Sheet & Cash Flow

Exiting the third quarter, COPEL had cash and cash equivalents of R$1,417.7 million ($437.6 million) versus R$828.3 million ($256.4 million) at the prior-quarter end. Loans, financing and debentures increased 12.5% sequentially to R$6,783 million ($2,087.1 million).

In the first nine months of 2016, COPEL generated net cash of R$1,057.6 million from its operating activities, increasing 22.5% year over year. Capital spending on the purchase of property, plant and equipment increased 32.7% year over year to R$938.6 million.

During the period, the company distributed approximately R$359.3 million as dividends and interest on equity.
 
Outlook

For 2016, COPEL plans to use R$3,236.8 million in capital expenditure. Of the total, roughly R$1,695.1 million will be used for the Generation and Transmission business, R$627 million for the Distribution business and R$176 million for the Telecommunications business. The rest is from improving other businesses.

COPEL-ADR PR B Price, Consensus and EPS Surprise

 

COPEL-ADR PR B Price, Consensus and EPS Surprise | COPEL-ADR PR B Quote

Zacks Rank & Other Stocks to Consider

With market capitalization of $2 billion, COPEL currently carries a Zacks Rank #3 (Hold). Better-ranked stocks in the utility industry include Ameren Corporation (AEE - Free Report) , Avista Corporation (AVA - Free Report) and CenterPoint Energy, Inc. (CNP - Free Report) . All these stocks carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 (Strong Buy) Rank stocks here.

Ameren Corporation and Avista Corporation’s earnings estimates for 2016 have been revised upward over the last 60 days.

CenterPoint Energy’s estimates grew for both 2016 and 2017. Also, it has a positive average earnings surprise of 5.07% for the last four quarters.

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