Why did AGL Energy’s (ASX:AGL) earnings fall in FY22?

Highlights:

• In the financial year 2022, the underlying EBITDA of AGL fell 27% to AU$1,218 million.
• During the year, the earnings declined because of planned and unplanned outages, milder weather, higher cost during peak demand and so on, as per AGL.
• The ASX-listed oil and gas company has announced a dividend of 10 cents per share.

Retail energy operator, AGL Energy Limited (ASX:AGL), on Friday (19 August 2022), released its financial results for the year ending on 30 June 2022 (FY22). For the year, underlying profit after tax (PAT) and underlying EBITDA fell significantly.

AGL reported a 27% decline in underlying EBITDA to AU$1,218 million, and underlying profit after tax dropped to AU$225 million, down 58% on FY21.

Courtesy today’s release, the share price of AGL opened in the red. AT 10:16 AM AEST, AGL shares were spotted trading 3.92% lower at AU$7.84 per share. With this, the share price has dropped 0.76% in last six months and on a year-to-date basis, the share price surged by 24.56%.

Meanwhile, the benchmark index, ASX 200 Energy (INDEXASX:XEJ) was up 4.558% to 10,737.2.

Reason behind the fall in AGL’s underlying EBITDA and PAT

Graeme Hunt, managing director and CEO, AGL, highlighted in today’s announcement that it was an anticipated fall in underlying PAT and EBITDA on a year-over-year basis. During the year, earnings from trading and origination electricity were reduced because of lower wholesale customer prices, higher costs of capacity to handle peak demand and ‘absence of the Loy Yang Unit 2 insurance proceeds recognised in FY21.’

Hunt added that unplanned and planned plant outages, milder weather, unprecedented market suspension and volatility, margin compression through customer switching and increased residential solar volumes also impacted the financial results for FY22.

Key highlights from AGL’s full-year results

• Total AGL customer services remained flat on FY21 at 4.2 million.
• Total generation volumes were also flat at 40,755 GWh.
• The targeted operating cost was reduced during the year by over AU$150 million. Now, the group is on track to report a reduction of AU$100 million in sustaining capital expenditure by FY23.
• At 30 June 2022, the company had around AU$609 million of undrawn debt facilities and cash available.

Dividend announced by AGL

AGL announced a final dividend of 10 cents per share, consistent with the dividend policy to maintain a payout ratio of 75% of underlying PAT.

The final dividend is unfranked, and the tentative payment date is 27 September 2022.

Outlook for FY23

AGL shared that earnings during the FY23 would be strong despite the challenging market and energy industry conditions. The management mentioned that the organisation is largely hedged for the coming year.

AGL has not shared the guidance for FY23 and is expected to share the same in late September.