U.S. Markets close in 2 hrs 34 mins

COPEL (ELP) Records Loss in Q4 on Weak Sales, High Costs

Zacks Equity Research

Companhia Paranaense de Energia ELP or COPEL reported disappointing results for fourth-quarter 2016. The company recorded a loss of R$0.29 per share or 9 cents per American Depository Receipt (ADR), as against earnings of R$1.45 per share or 38 cents per ADR in the year-ago quarter.

For 2016, the company’s earnings were R$3.50 per share or $1.00 per ADR. The ADR equivalent compared unfavorably with the Zacks Consensus Estimate of $2.50 per ADR.


In the quarter, COPEL generated net operating revenue of R$3,426.4 million ($1,038.3 million), down 3.6% year over year.

The top-line weakness was triggered by decline of 30.7% in electricity sales to final customers, 7.4% in construction revenues, 39% in fair value of assets from the indemnity for the concession and 17.6% from distribution of piped gas. This softness was partially offset by 9.6% growth in electricity sales to distributors, 23.3% sales derived from use of the main distribution and transmission grid, 32% growth in telecommunications revenues and 120.8% increase in other operating revenues.

For 2016, the company’s net operating revenue declined 12.3% year over year to R$13,101.8 million ($3,754.1 million).

Electricity Sales

COPEL’s electricity sales to final customers include Copel Distribuicao’s sales in the captive market and Copel Geracao e Transmissao’s sales in the free market.

The company’s electricity sales to final customers decreased 10.1% year over year to 6,250 gigawatt hours in the quarter. The decline was led by a fall of 18.6% in Industrial, 12.9% in Commercial, 4.1% in Rural and 1.6% in Other segment, partially offset by a marginal increase of 0.3% in Residential.


In the quarter, COPEL recorded operating costs and expenses of R$3,396.1 million ($1,029.1 million), up 36.2% year over year. Expenses, as a percentage of revenues, were 99.1% versus 70.2% in the year-ago quarter. The company recorded 23.6% growth in costs related to electricity purchased for resale, 8.7% in personnel and management, 2.6% in pension and healthcare plans and 1.8% in depreciation and amortization.      

However, the impact of higher costs and expenses was partially offset by 37.7% fall in charges for the main distribution and transmission grid, 2.8% costs related to materials and supplies, 22.4% in materials & supplies costs for power electricity, 49.9% decline in natural gas and supplies costs for the gas business, 8.4% in third-party services, 8.5% in construction costs and 45.1% in other costs and expenses.     

Adjusted earnings before interest, tax, depreciation and amortization (“EBITDA”) decreased 10% to R$658.1 million ($199.4 million), with an EBITDA margin of 19.2%.

Balance Sheet & Cash Flow

Exiting the fourth quarter, COPEL had cash and cash equivalents of R$982.1 million ($302. 2 million) versus R$1,417.7 million ($437.6 million) at the prior-quarter end. Loans, financing and debentures decreased 8.1% sequentially to R$6,235.2 million ($1,918.5 million).

In 2016, COPEL generated net cash of R$1,476.8 million ($423.2 million) from its operating activities, increasing 11.8% year over year. Capital spending on the purchase of property, plant and equipment increased 70.7% year over year to R$1,284.4 million ($368 million).

During the period, the company distributed approximately R$368.9 million ($105.7 million) as dividends and interest on equity.

For 2017, COPEL plans to use R$2,034.9 million in capital expenditure. Of the total, roughly R$570.3 million will be used for the Generation and Transmission business, R$629.6 million for the Distribution business and R$164.3 million for the Telecommunications business. The rest is from improving other businesses.

Companhia de saneamento Basico Do Estado De Sao Paulo - Sabesp Price and Consensus

Companhia de saneamento Basico Do Estado De Sao Paulo - Sabesp Price and Consensus | Companhia de saneamento Basico Do Estado De Sao Paulo - Sabesp Quote

Zacks Rank & Stocks to Consider

With market capitalization of $2.5 billion, COPEL currently carries a Zacks Rank #3 (Hold). Better-ranked stocks in the utility industry include Alliant Energy Corporation LNT, Ameren Corporation AEE and CenterPoint Energy, Inc. CNP. All these stocks carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 (Strong Buy) Rank stocks here.

Alliant Energy’s earnings estimates for 2017 and 2018 have been revised upward over the last 60 days.

Ameren Corporation reported better-than-expected results in three out of last four quarters, with an average positive earnings surprise of 4. 20%.

CenterPoint Energy’s estimates grew for both 2017 and 2018. Also, it has a positive average earnings surprise of 0.40% for the last four quarters.

More Stock News: 8 Companies Verge on Apple-Like Run

Did you miss Apple's 9X stock explosion after they launched their iPhone in 2007? Now 2017 looks to be a pivotal year to get in on another emerging technology expected to rock the market. Demand could soar from almost nothing to $42 billion by 2025. Reports suggest it could save 10 million lives per decade which could in turn save $200 billion in U.S. healthcare costs.

A bonus Zacks Special Report names this breakthrough and the 8 best stocks to exploit it. Like Apple in 2007, these companies are already strong and coiling for potential mega-gains. Click to see them right now >>

Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
Ameren Corporation (AEE): Free Stock Analysis Report
CenterPoint Energy, Inc. (CNP): Free Stock Analysis Report
Companhia Paranaense de Energia (COPEL) (ELP): Free Stock Analysis Report
Alliant Energy Corporation (LNT): Free Stock Analysis Report
To read this article on Zacks.com click here.
Zacks Investment Research