Genesis shares drop after earnings guidance cut

Genesis Energy's Reg Soepnel pictured overlooking the huge units at Huntly Power Station in the Waikato. Photo / Alan Gibson.

Genesis Energy, New Zealand's largest energy retailer, cut its forecast for annual earnings after losing electricity and gas customers amid increased competition and as wholesale electricity prices declined. The shares dropped after the announcement.

Earnings before interest, tax, depreciation, amortisation and other fair value changes will be between $330 million and $345 million in the year ending June 30, the Auckland-based company said in a statement. That's lower than its $363.4 million prospectus estimate from March last year. Net income is expected to be between $85 million and $95 million, compared with its prospectus estimate $95.4 million, it said.

Shares in Genesis Energy are the fourth-worst performer on the NZX 50 benchmark index in the past month, declining 6.5 per cent. The company warned when reporting first-half earnings in February that it faced headwinds of weaker global oil prices and aggressive competition for customers that would make it a stretch to reach its full-year earnings target. The stock fell 4.6 per cent to $2.06 today.

"The headwinds to Genesis Energy's financial performance reported at the half year have now, however, begun to crystalise, leading the company to revise its earnings guidance for FY2015," the company said. "Competition for electricity and gas customers remained elevated over the three-month period ended March 31 2015 as Genesis Energy experienced a reduction in both electricity and gas customers."

During the three months ended March 31, Genesis Energy lost 0.3 per cent of its electricity customers, taking the total to 516,167. Its gas customers reduced 1.3 per cent over the quarter to 106,781, it said.

Third quarter total retail electricity sales volumes were 2 per cent lower than the year earlier period, as mass market volumes declined 5 per cent, due to a 3 per cent drop in electricity customer accounts and a 2 per cent drop in electricity usage per customer, it said.

The company's mass market gas volumes dropped 8 per cent compared with the same quarter a year earlier due to lower gas customers and reduced usage per customer, it said.

Genesis said it expects to pay a full-year final dividend of 8 cents per share in October, in line with its prospectus.

See the Genesis release to the stock exchange here: