- While consumers welcome the prospect of lower energy costs, Origin Energy’s (ORG) HY21 results have taken a hit from a sluggish commodity market
- The majority of the ASX200 lister’s metrics were down in its summation for the period, including a 98 per cent plunge in statutory profits
- Underlying profits also took a hit, albeit slightly less dramatically, dropping from $528 million to $224 million
- Subdued energy demand and prices were the leading causes of the profit slump, in a period Origin’s CEO described as “very challenging”
- Despite this, Origin is still continuing to pay out to shareholders, announcing a scaled down unfranked interim dividend of 12.5 cents
- Origin Energy is down on the market by 1.96 per cent following the announcement, trading at $4.51 cents
While consumers welcome the prospect of lower energy costs, Origin Energy’s (ORG) HY21 results have taken a hit from a sluggish commodity market.
Key metrics across the majority of the ASX200 lister’s summation for the period ended December 31 were down, in an operating environment Origin Chief Executive Officer Frank Calabria described as “very challenging.”
Origin pulled together a statutory profit of $13 million for the half-year, shedding 98 per cent on the $599 million it reported in HY20, with total group revenue off 10 per cent, down to $6 million.
Underlying profits also took a hit, albeit slightly less dramatically, dropping from $528 million to $224 million.
Underlying earnings before interest, taxes, depreciation and amortisation plummeted $436 million to clock in at $1.15 million, falling 12 per cent and 38 per cent across energy markets and integrated gas performance respectively.
In a broader context, Origin cited the ongoing impacts of COVID-19 on energy demand and prices and subdued economic conditions, as leading causes for the unfavourable profit deliveries.
The other side of the coin equated to lower prices for Origin customers, including an 11 per cent average reduction in Victorian residential prices from the beginning of the year.
Despite this, Origin is still continuing to pay out to shareholders, announcing an interim dividend of 12.5 cents, a touch below the fully franked 15 cent distribution it shelled out in December 2019.
The company also readjusted its earnings guidance for the financial year from the $1.15 million to $1.3 million range to between $1 million and $1.14 million.
Free cash flow was a stronger point of Origin’s half-yearly, clocking in at $655 million and allowing the company to knock off $460 million of its $4.7 billion debt balance. The company also collected $265 million in cash distributions from its 37.5 per cent stake in Australia Pacific LNG.
The Australian Energy Market Commission says most Australians can expect to see falling electricity prices and lower bills in the coming years, but prices could pick up before 2023.
Looking ahead, Origin flagged an uncertain near-term outlook for energy markets.
“A mild summer has compounded already weaker demand and reduced volatility, gas supply costs are expected to increase, and wholesale electricity prices remain depressed, particularly as renewable supply continues to come online,” Origin’s CEO explained.
Despite this, he affirmed the strong fundamentals of energy markets and integrated gas puts Origin in a strong position to continue maximising value from its businesses.
Origin Energy is down 1.96 per cent following the announcement, trading at $4.51 cents at 12:57 pm AEDT.