GDF Suez SA (GSZ) declined the most in four years in Paris trading after Europe’s largest utility by market value forecast lower earnings next year and weakness in 2014.
GDF dropped as much as 16 percent, the most since October 2008. Recurring net income will slide to 3.1 billion euros ($4 billion) to 3.5 billion euros from an estimated 3.7 billion to 4.2 billion this year, France’s former gas monopoly said in a statement. Profit will be “in the same range” in 2014, it said. GDF will cut investments, while maintaining dividends.
“The operational trend is much worse than the market perceived,” JPMorgan Cazenove analysts including Vincent de Blic said in a note. The outlook is “very disappointing.”
GDF fell 12 percent to 15.175 euros by 2:16 p.m. in Paris.
The utility, which issued the estimates before an investor day in Paris today, said the weakening outlook results from a “demand crisis” in Europe, slowing economic growth and a boom in U.S. gas production. GDF follows EON SE, Germany’s largest utility, in saying it won’t meet earnings goals for next year.
GDF plans to cut its share of profit from Europe as the economic crisis in the region slows demand. The utility is seeking to double sales of liquefied natural gas to emerging markets by 2020 in a push into faster-growing economies.
The company is navigating “significant power overcapacity in Europe” against a backdrop of policies to boost renewable generation, Chief Financial Officer Isabelle Kocher said.
European demand for natural gas is down 14 percent since 2010 and power by 25 percent, according to a presentation by the utility. The crisis will turn around in 2015, it said.
“We are very confident for a rebound,” Chief Executive Officer Gerard Mestrallet said, declining to give figures.
Financial targets for 2013 are based on estimated earnings before interest, taxes, depreciation and amortization of 13 billion to 14 billion euros, the Paris-based company said. That compares with an Ebitda outlook of 17 billion euros this year.
The utility, which had debt of 45.9 billion euros at the end of September, didn’t repeat a forecast from earlier this year for recurring net income to reach 5 billion euros in 2015. Yesterday’s statement only said it expects a “rebound.”
GDF plans to cut debt by a third to about 30 billion euros by the end of 2014 and spending by about 20 percent to 7 billion to 8 billion euros a year in 2013 and 2014. It earlier forecast 2013 spending at the lower end of a 9 billion to 11 billion-euro range and 10 billion to 11 billion euros of investment in 2012.
Cost cuts will affect the company’s “gross profit and loss contribution” by 3.5 billion euros in 2015. Asset sales will be 11 billion euros in 2013 and 2014, up from a typical 3 billion euros. GDF will stick with a policy of at least maintaining its dividend in 2013 and 2014, while it’s prepared to cut spending further as shareholder payments take priority, Mestrallet said.
Its Ebitda and debt will partly fall as an investor accord over its 34 percent-held Suez Environnement (SEV) ends, allowing it to alter how it consolidates the company from July. The Ebitda will drop 2.5 billion euros and debt 7.5 billion euros as a result.
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