AGL share price dips after 58% profit slash

The energy giant reported its FY22 earnings card this morning. Here are the details.

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Key points

  • AGL posted its FY22 earnings card this morning, showing that its underlying profit was reduced by 58%
  • The market responded by reducing its share price by 3%
  • Guidance for FY23 is expected this September

The AGL Energy Limited (ASX: AGL) share price is in the red this morning after the company posted a largely negative earnings card for FY22.

The energy giant's shares are currently down 3.19% at $7.90 each. Earlier, they had been as low as $7.77 and as high as $8.05.

Let's go over the highlights of the report.

What did AGL report?

Earnings were said to be lower in FY22 due to cheaper wholesale customer prices and increased costs to meet peak energy demand. Other headwinds that battered the stock included plant outages, market volatility, customer churn, and increased competition from residential solar power generation.

Despite the company's problems in FY22, AGL noted that its underlying profit of $225 million fell within previously posted guidance estimates.

Some relief for the company's bottom line was found in the form of a $150 million reduction in the company's operating costs and a stable total of services to customers provided at 4.2 million, which it achieved by maintaining market share amid churn and competitive forces.

A final unfranked dividend of 10 cents per share was announced, representing a payout ratio of 75% of the company's underlying profit after tax. The dividend will be paid on 27 September.

What else happened in FY22?

On a broader macro scale, electricity prices increased in FY22 due to geopolitical events and a rise in commodity prices for coal and gas.

In May, AGL scrapped its demerger plans to divide the business into two separate entities. Plans were thrown out over concerns that it would lower the company's valuation and hamper efforts to reduce carbon emissions. AGL incurred a $125 million cost from withdrawing from the plans in FY22.

AGL also made some progress with its plans for energy hubs. One project is a 250-megawatt battery that is being built and is expected to be operational in 2023. Another project is a feasibility study to assess the development of a green hydrogen production facility.

What did management say?

Commenting on the results, AGL managing director and CEO Graeme Hunt said:

AGL's FY22 results delivered an underlying profit after tax within guidance, reflecting the resilience of AGL's underlying business against a backdrop of challenging energy industry and market conditions that have intensified in the second half.

What's next?

AGL said it is expected to post guidance for FY23 in September. As part of issuing guidance, it also expects to give investors an update on the company's strategic direction following the scrapping of its demerger plans.

The company expects to benefit from higher wholesale electricity prices from FY24 onwards.

AGL also said the contracts of its coal and gas positions would help it shelter against the cost rises of the commodities.

AGL share price snapshot

The AGL share price is up 24% year to date. Over the same period, the S&P/ASX 200 Index (ASX: XJO) is down by 6%.

AGL has a market capitalisation is $5.49 billion.

Motley Fool contributor Matthew Farley has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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