U.S. Markets close in 6 hrs 10 mins

COPEL Q1 Earnings Fall Y/Y, Revenues Offset by High Costs - Analyst Blog

Zacks Equity Research

Companhia Paranaense de Energia ELP or COPEL reported a year-over-year decline in net earnings for first-quarter 2015. Net income of R$470 million (US$164.3 million) were down 19.4% year over year.  Earnings came in at R$1.72 per share or 60 cents per American Depository Receipt (“ADR”).


COPEL generated net revenue of R$4,237.1 (US$1,481.5 million) in the quarter, reflecting an increase of 38.9% over the year-ago tally.  

The top-line improvement was driven by sales increase in the following categories: 44% in electricity sales to final customers, 16.7% in electricity sales to distributors, 6.7% in use of the main distribution and transmission grid, 21.3% in telecommunications, and 50.2% in distribution of piped gas. However, these positives were partially offset by a 7.5% decline in construction revenues.

Electricity Sales

COPEL’s electricity sales to final customers inched up 0.8% year over year to 7,288 Gigawatt hours (GWh) in first-quarter 2015. The rise was prompted by a 0.7% increase in the Industrial segment, 3.6% in Commercial and 1.8% in Rural, partially offset by a 1.4% decline in Residential segment.

Electricity sales to final customers include Copel Distribuição’s sales in the captive market and Copel Geração e Transmissão’s sales in the free market.


COPEL’s operating costs and expenses soared 50.2% year over year to R$3,607.8 million (US$1,261.5 million). As a percentage of revenues, it came in at 85.1% as against 78.7% in the year-ago quarter.

The company recorded steep increases of 848.2% in cost of materials and supplies for power electricity, 82.4% in electricity purchased for resale and 261.7% in provision and reversals. Additionally, higher costs were reported in the following categories: 61.1% in charge of the main distribution and transmission grid, 29.9% in pension and healthcare plan, and 50.9% in other cost and expenses.

Earnings before interest, tax, depreciation and amortization (EBITDA) decreased 2.8% to R$834.9 million (US$291.9 million) with an EBITDA margin of 19.7% versus 28.1% in the year-ago quarter.

Balance Sheet

Exiting first-quarter 2015, COPEL had cash and cash equivalents of R$1,132.5 million (US$348.5 million), up 53% from R$740.1 million (US$276.2 million) at prior-quarter end. Loans, financing and debentures edged down 0.8% sequentially to R$4,715 million (US$1,450.8 million).

Cash Flow

In first-quarter 2015, COPEL generated net cash of R$228.2 million (US$79.8 million) from its operating activities, up significantly year over year. Capital spending on the purchase of property, plant and equipment shot up 56.5% over the year-ago period to R$286.1 million (US$100 million).

During the quarter, the company distributed approximately R$0.3 million (US$.1 million) as dividends and interest on equity.

Outlook: In 2015, COPEL plans to spend R$2,476.9 million in capital expenditure. Of the total amount, roughly R$1,300.1 million will be used for the Generation and Transmission business, R$784.7 million for the Distribution business, R$107.7 million for the Telecommunications business and R$284.4 million as investments in new businesses.

With a market capitalization of $3.1 billion, COPEL presently carries a Zacks Rank #3 (Hold). Better-ranked stocks in the electric utility industry include DTE Energy Company DTE, Alliant Energy Corporation LNT and Huaneng Power International, Inc. HNP. While DTE Energy sports a Zacks Rank #1 (Strong Buy), both Alliant Energy and Huaneng Power carry a Zacks Rank #2 (Buy).

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 >>

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
DTE ENERGY CO (DTE): Free Stock Analysis Report
ALLIANT ENGY CP (LNT): Free Stock Analysis Report
HUANENG POWER (HNP): Free Stock Analysis Report
To read this article on Zacks.com click here.
Zacks Investment Research