PPC’s nine-month earnings drop 53.4 pct to 72.2 million

Shares in the Public Power Corporation (PPC) fell yesterday after the electricity utility said its net profit in the first nine months of the year more than halved from the same period last year, hit by high fuel costs. Fuel costs have been a constant problem for PPC as the company cannot pass on rising costs to consumers. Greece still controls electricity tariffs and what PPC can charge. «Financial results for the first nine months of 2006 were clearly affected by the considerable rise in the price of fuel and increased expenditures for energy purchases,» CEO Dimitris Maniatakis said in a statement. Net profit in the period fell 53.4 percent to 72.2 million euros ($92.61 million), well below an average forecast of 104.7 million euros given in a Reuters poll of seven analysts. PPC shares were down 1.98 percent to 19.80 euros on the Athens Stock Exchange. The shares, up 9.4 percent year to date, have underperformed the broader Greek market which has gained about 18 percent. «Higher-than-expected fuel costs and electricity pool prices hurt the bottom line,» said HSBC Pantelakis analyst Paris Mantzavras. «Tariff increases were inadequate to cover the increased costs.» A 3.2 percent rise in electricity charges in September last year and an average tariff increase of 4.8 percent, effective from August 2006, were not enough to offset the increase in fuel costs, the utility said. Earnings before interest, tax, depreciation and amortization (EBITDA) fell 13.5 percent to 632.5 million euros. Sales grew 10.4 percent to 3.58 billion euros, the company said. Profits were also squeezed by an increase in staff costs, which rose 7.4 percent to 998 million euros, as the company reached a new collective wage agreement with workers, retroactive from February 2006, the company said. Financial expenses dropped almost 10 percent to 89.8 million euros as PPC’s cost-reduction and streamlining program, implemented at the beginning of the year, began to bear fruit. The stock trades at about 39 times 2006 earnings, a premium compared with its European peers, which have an earnings multiple of 21.2, according to Reuters Estimates data. Analysts say the higher P/E ratio is due to optimism Greece may liberalize tariffs. (Reuters)

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