9M23: Strong earnings, FY23 guidance raised.

Verbund’s 9M23 results were supported by a higher-than-expected hydro coefficient of 0.93 (compared to 0.84 in 9M22) and still-high power selling prices due to the forward selling policy. As a reminder, 60% of the group’s generation is contracted on the basis of 1-year forwards. These excellent earnings were possible due to the high market price environment last year, which is not a normative situation, so we will see a normalisation over the next quarters.

1H23: Water conditions bring rain and shine to earnings

Verbund published earnings in line with the consensus after a strong recovery during 1Q. The Hydro segments contributed 89% of the EBITDA and increased by 58% yoy in the back of higher average achieved prices on futures while renewables also performed well with +6.2% in power generation.

Q1 2023: lower volumes more than offset by higher wholesale market prices

Verbund published strong earnings supported by higher power prices on the wholesale market and by a recovery in hydro generation due to better water supply conditions offsetting lower production from thermal generation. The FY 2023 guidance was confirmed with an increase in the EBITDA range from €3.5-4.4 bn to €3.7-4.3bn.

FY2022: Exceptional year implies exceptional dividend

It came as no surprise to see that wind, solar but also thermal generation drove Verbund’s results in 2022, despite weak hydro power generation amidst a lower coefficient that led the group to proceed with electricity buy backs at high market prices. The significantly higher average prices in wholesale markets in an unprecedented energy context led the group to propose an exceptional dividend. However, the impact of the different levies on excess profits could weigh on earnings.

Q3 22: low hydropower production weighs on the FY2022 EBITDA guidance

Verbund reported an EBITDA at €1.933bn for the 9M 2022 period, up by 68%, mainly supported by higher spot and forward prices on the electricity market amid the galloping energy crisis marked by the difficult geopolitical and energy industry developments. The group however suffered from a lack a water in power generation with a negative impact on the valuation of the hedging positions.

H1 22: low volumes prevent us from getting carried away

EBITDA surged by 110.5%, prices soared by 70.7%, and the guidance was upgraded… but results the were something of a miss. This is the current ambivalence surrounding Verbund. The group suffers from a very high share price making investors’ expectations quite difficult to satisfy. At issue: a drop in hydro volumes due to adverse weather conditions. Overall, the top of the momentum seems (finally) to be visible.

Q1 22: the cash cow soon milked ?

As expected, Verbund released a strong start to the year thanks to surging power prices. EBITDA was up 169% yoy to €815m. This enabled the group to improve its guidance by increasing the low end of the range by c.10%. However, the risk of windfall taxes continues to increase in Austria and leaves room for doubt on the sustainability of such profits. Our long-dated cautious view now seems justified (finally!).

FY21: a cash cow but not immune to risks

With 2021 EBITDA growth of 22.2% yoy, had Verbund reached a peak ? But this was without counting on energy markets that trivialise the exceptional, allowing the group to release a FY22 outlook well above 2021’s (+93%) and even the 2022’s consensus (+27%) at the EBITDA level. Verbund is in the midst of a dream, reaping the benefits of an aggressive hedging policy. However, excess profits should be used as much for capex/M&A/exceptional dividend as for margin and windfall taxes…

9M 21: pushed again by high power prices, but less than expected

Accustomed to doing so, Verbund benefited from persistent and strong power prices (EBITDA +16.3%) to increase its FY guidance for the third time in a row, even if it remained below our FY estimates. However, mark-to-market prices strengthened the outlook for 2022-23. The group also confirmed in having taking part in several renewables M&A processes, and paves the way for a significant acquisition in the next few months/years.

H1 21: power prices to boost margins and upgrade to guidance

Verbund reported a strong first half, with a rise in both EBITDA (+2.5%) and adjusted results (+4.7%). Higher electricity prices on spot markets more than offset lower electricity generation and thus enabled the group to raise its full-year outlook for the second time in a row.

Narrowed forecasts despite a slow start to the year

Verbund released a set of mixed figures for the first quarter of the year. EBITDA is down by 8.6% as a result of significantly lower water supply. On the other side, the group narrowed its guidance by raising the low end of its target ranges. The Austrian utility also commented on the relationship between its stock price and inflows/outflows in green ETFs, something uncommon from corporates. Negative view confirmed.

Disappointing FY21 guidance

On the back of a hydro coefficient above the long-term average and higher average contract prices, the adjusted EBITDA increased by 9.2% (in line with expectations) and, thanks to lower financial costs, the adjusted group result increased by 11.2% (slightly above expectations). The dividend proposal of €0.75/share is perfectly in line with expectations but implies a non-significant yield. FY21 is disappointing; we therefore confirm our negative recommendation.

H1 20: about in line; FY20 outlook is raised

Due mainly to a hydro coefficient 5pp below the long-term average and 16pp below the extraordinary level of H1 19, EBITDA decreased by 6.8%, to €639m. The adjusted group result was down 11.6% to €301.0m. The group slightly narrowed its FY20 outlook. EBITDA and net result mid-point are up by respectively 3% and 16%. After these strong numbers, we will revise our model, but we keep our negative recommendation, due to the stock’s stellar multiples.

Q1 20 results in line

EBITDA decreased by 5%, and the group’s result by 10%. Due to low electricity prices, Verbund had updated its guidance, which is line with our last model update. Moreover, as Verbund has been used as a proxy for the carbon price in Europe, since the latter is expected to remain more or less flat, we see no reason to rush into the stock at the moment.

FY19 as expected

Good growth in FY19, but in line with expectations. Growth was supported by a higher achieved price, and favourable weather with a hydro coefficient 7.4% higher than in FY18. EBITDA increased by 37% to €1.2bn. Mechanically, the adjusted net income increased by 60% to reach €0.5bn. Net debt was down by 12% to €2.2bn. In line with the 40-50% pay-out policy, the proposed dividend is €0.69, the current yield is then rather low at 2.1%.

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