EWE sets course for successful future

Oldenburg, Germany, 25 April 2019. EWE closed the 2018 financial year in line with its forecast: operating earnings before interest and taxes (OEBIT) of EUR 377.1 million was down almost 22 per cent on the previous year’s value (EUR 484.7 million). In spring 2018, EWE expected its OEBIT to be 15 to 30 per cent lower than in the previous year. Consolidated net income for the period of EUR 167.3 million was also down on the previous year as expected (EUR 256.1 million). The decline in sales of EUR 1,965.0 million to currently EUR 5,703.9 million (previous year: EUR 7,668.9 million) resulted primarily from the first-time application of new international accounting principles governing the recognition of revenue from contracts with customers (IFRS 15).

“We look back on a difficult but successful 2018 financial year“, summarised Stefan Dohler, the Chief Executive Officer of EWE AG, at the company’s press conference on its financial statements. “Difficult because we continue to operate under high competitive pressures and are under pressure to change. As expected, that is reflected in our financial statements. Successful because we have a realistic view of ourselves and our environment and managed to achieve the targets set for 2018.” Dohler also pointed out the key measures taken in recent months: the company split from its Turkish companies and is partnering with Deutsche Telekom in expanding the fibre-optic network in the Northwest. It is also still on course to find a new strategic investor. “EWE has a solid foundation, a clear strategy and committed employees, all of which enable it to transform itself step by step into a modern and increasingly digital service provider. We are working on this together with confidence and a commitment to innovation“, says Dohler. The Group strategy published in summer 2018 will come into effect in stages over the coming months. This will ensure Group-wide management by business area and an increased focus on performance orientation on the part of all companies and units.

Regarding the change in OEBIT in the year under review, Wolfgang Mücher, CFO of EWE AG, remarked: “As anticipated, last year’s implementation of the Network Fee Modernisation Act led to a significant reduction in income due to a downturn in income from network use charges. Regulatory effects also had an impact in the network companies of EWE and swb. Renewables, Network, Gas Storage, Sales, Services and Trading and swb were for the most part in line with the expectations established on this basis. Negative effects were, for the most part, offset across the business areas. The Overseas business area failing to perform as expected is due not only to the generally challenging energy framework in Poland but also to the absence of one-off effects realised in the previous year.“

With regard to consolidated net income for the period, which in addition to the operating business, covers non-operating effects as well as net interest income and taxes, Mücher says, “As expected, consolidated net income was also down on the previous year in line with the operating result. After taking everything into consideration, EUR 167.3 million remains, which clearly shows that we managed to hold our own in this difficult environment.”

With regard to sales, Mücher remarks: “The initial application of IFRS 15 (Revenue from Contracts with Customers) resulted in the offsetting of sales and the cost of materials and services. However, the decline in sales from an accounting perspective due to these circumstances did not affect our result.”

EWE invested a total of EUR 529.7 million in the year under review (including Turkey) (2017: EUR 500.4 million). The majority went towards electricity, gas and telecommunications network infrastructure (approx. EUR 300 million).

The average number of employees in the Group rose year on year by 291 to 8,508 (2017: 8,217). In addition to other factors, this increase was driven by project-related increased personnel requirements in the BTC group and the recruitment of additional employees combined with a decline in temporary staff at EWE Offshore Service & Solutions GmbH.

The separate financial statements of EWE AG prepared according to the German Commercial Code (HGB) show a net profit of EUR 257.7 million for the 2018 financial year, far exceeding expectations (previous year: EUR -136.9 million). “The positive performance was mainly caused by the appreciation of shareholdings despite decreased income from profit transfer agreements, reports Mücher. “The Management Board and the Supervisory Board have therefore issued the shareholders with a recommendation to pay a dividend of EUR 88 million, as in previous years.”

Outlook for 2019
Taking into consideration the specific developments expected within the industry, the political and regulatory environment and the continuing intense competition in the energy market, EWE expects its operating EBIT in the current financial year to increase by 10 to 25 per cent compared to 2018. The forecast year-on-year improvement is primarily based on positive trends in the Sales, Services and Trading business areas (including increased sales volumes in the private customer market, growing business in energy-related services, storage management) and swb (improved operating EBIT of the network companies and disposal).

Publication
EWE will publish its report for the first half of the year on 27 August 2019.