Companhia Paranaense de Energia ELP or COPEL reported a year-over-year increase in net earnings for second-quarter 2015. Net income of R$302 million (US$98.4 million) was up 21.7% year over year. Earnings came in at R$1.10 per share or 36 cents per American Depository Receipt (“ADR”).
COPEL generated net revenue of R$3,908.8 (US$1,273.2 million) in the quarter, up 25.4% year over year.
The top-line improvement was driven by sales increase in the following categories: 54.3% in electricity sales to final customers, 28.1% in telecommunications, and 33.1% in distribution of piped gas. However, these positives were partially offset by an 18.9% decline in construction revenues, 4.5% in use of the main distribution and transmission grid, 11.2% in electricity sales to distributors and 38.8% in other operating revenues.
COPEL’s electricity sales to final customers inched up 1% year over year to 5,935 Gigawatt hours (GWh) in second-quarter 2015. The rise was prompted by a 3.7% increase in the Industrial segment, 4.6% in Commercial and 0.9% in Rural; partially offset by a 3.6% decline in Residential segment and 1.2% in others.
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.
In second-quarter 2015, COPEL’s operating costs and expenses jumped 27.9% year over year to R$3,626.9 million (US$1,181.4 million). As a percentage of revenues, it was 92.8% as against 90.9% in the year-ago quarter.
The company recorded increases of 91.1% in cost of materials and supplies for power electricity, 48.9% in electricity purchased for resale and 107.9% in provision and reversals. Additionally, higher costs were reported in the following categories: 54.1% in charge of the main distribution & transmission grid, and 30.7% in pension & healthcare plan.
Earnings before interest, tax, depreciation and amortization (“EBITDA”) increased 5.7% to R$493.2 million (US$160.7 million), with an EBITDA margin of 12.6%.
Balance Sheet & Cash Flow
Exiting second-quarter 2015, COPEL had cash and cash equivalents of R$867.8 million (US$276.4 million), down from R$1,132.5 million (US$348.5 million) at prior-quarter end. Loans, financing and debentures totaled R$6,047 million (US$1,925.8 million), up from R$4,715 million (US$1,450.8 million) in the previous quarter.
Also, in first-half 2015, COPEL generated net cash of R$578.8 million (US$295.5 million) from its operating activities, up 25.9% year over year. Capital spending on the purchase of property, plant and equipment increased 74.6% year over year to R$522.2 million (US$176.4 million).
During the period, the company distributed approximately R$294.9 million (US$99.6 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 $2.5 billion, COPEL presently carries a Zacks Rank #3 (Hold). Better-ranked stocks in the electric utility industry include Empresa Nacional de Electricidad S.A. EOC, Alliant Energy Corporation LNT and American Electric Power Co., Inc. AEP. While Empresa Nacional de Electricidad sports a Zacks Rank #1 (Strong Buy), both Alliant Energy and American Electric Power carry a Zacks Rank #2 (Buy).
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