Iberdrola SA (IBE), Spain’s biggest utility, reported first-quarter net income of 1 billion euros ($1.3 billion), matching analysts’ estimates.
Sales rose 10 percent to 9.3 billion euros while operating profit in Spain fell 10 percent as power generation slumped, the Bilbao-based company said today in a filing.
Iberdrola is cutting back on investments and looking to sell assets to pay debt while maintaining dividend payments as its businesses in Spain and the U.K. endure economic slowdowns at home and abroad. Net debt was 31.7 billion euros, little changed from the previous quarter.
“The results once again show the capacity of Iberdrola to generate positive results in a very complicated macroeconomic situation,” Chairman Ignacio Galan said on a conference call with analysts today.
The shares gained as much as 2.5 percent in Madrid trading and were 1.4 percent higher at 3.461 euros at 12:20 p.m. The stock touched a nine-year low of 3.41 euros this month.
Standard & Poor’s last week lowered Iberdrola’s long-term credit rating to BBB+ from A-, three levels from junk. S&P said the deterioration of the Spanish economy is eroding Iberdrola’s financial stability.
Real Estate Losses
The yield on Spain’s government bonds surged this week as the government announced it will part-nationalize Bankia SA (BKIA), the biggest domestic lender that’s struggling to absorb losses on its real estate holdings. The extra yield investors demand to hold Spain’s 10-year debt rather than the German benchmark was 456 basis points today compared with 415 at the end of last week.
“There are things that we can’t control,” Iberdrola Chief Financial Officer Jose Sainz Armada said on the call. “What we can do is manage the balance sheet and the ratios in the most appropriate fashion. The rating is very important but maintaining liquidity, solidity and cash flow comes before everything.”
Regulatory changes in Spain announced at the end of March will cost Iberdrola 256 million euros a year in pretax profit, the company said. Spanish officials are trying to eliminate the shortfall between costs of supplying power and revenue raised from clients that has generated about 23 billion euros in debt.
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