Origin posts $1.43b loss amid ‘unparalleled’ market & More Latest News Here – Up Jobs

Origin posted a 30 per cent increase in underlying profit to $407 million for 2021-22, which still fell well short of consensus estimates of $536 million. A 63 per cent slump in earnings in the energy markets business was more than offset by a soaring profits at the Australia Pacific LNG business amid buoyant gas prices, despite the sale of the 10 per cent stake to US partner ConocoPhillips.

The contrasting performance by the two parts of Origin’s business reflect the stark divide between energy industry players impacted by the global supply crunch, in coal and gas that has been exacerbated by the war in Ukraine.

Yancoal on Thursday posted record profit that cleared its debt just five years after buying Rio Tinto’s coal assets, as coal exports to Europe surged, while Santos posted record first-half profits thanks to its buoyant LNG exports. Electricity suppliers have had it much tougher as they grapple with rising fuel costs, with heavy losses by EnergyAustralia in the June half, while embattled AGL Energy has advised it will not issue earnings guidance when it reports an expected drop in full-year profits on Friday.

Origin posted a $1.43 billion bottom line loss for 2021-22, dragged down by a $2.2 billion impairment on goodwill in the energy markets business that it already flagged in July. It still declared a more-than-doubled final dividend, of 16.5¢ per share.

Origin’s comment that underlying earnings in energy markets were expected to increase this coming year was taken by the market as signalling that the current consensus estimate for earnings before interest, tax, depreciation and amortisation (EBITDA) in the business to rise to $558 million from $365 million last year was too high and likely to be wound back.

“This reporting season the market doesn’t have the patience or appetite for uncertainty or disappointment, so any stocks that are disappointing are getting a little bit beaten up,” said Barrenjoey energy analyst Dale Koenders, describing the sell-off as “a bit of an overreaction”.

Mr Calabria said growth in energy markets this coming year would be driven by the gas business, with gross profits in electricity remaining “suppressed”.

He pointed to several uncertain factors that, when combined, made for a wide range of potential outcomes on earnings.

Those include the volumes of coal that will reach Origin’s huge Eraring coal-powered generator in NSW and the price of that, the volatility of wholesale electricity and gas price, and the price at which Origin can sell uncontracted gas.

But Mr Calabria said overall conditions have improved, with Origin now having contracted 4.4 million tonnes of coal supply for Eraring for the 2022-2023 financial year out of a targeted 5 million-6 million tonnes.

Wholesale electricity and gas prices have pulled back markedly in the last few weeks, with electricity down from almost $400 a megawatt-hour to about $150/MWh, while gas has more than halved from about $40 a gigajoule to less than $20/GJ.

“Overall we’ve actually improved our position on a number of fronts,” Mr Calabria told The Australian Financial Review, describing conditions last year as “almost unparalleled”.

“The markets have gone through in energy quite an extraordinary time in the last 12 months. We’re coming out of the back end of that and we’re certainly moving forward. We’ve still got to make sure we manage that risk effectively and navigate that: I think we’ve made a lot of steps towards it.”

Origin declared a 16.5¢-per-share final dividend, more than double the year-earlier 7.5¢ payout. But to the disappointment of some investors it put off a decision whether to extend an initial $250 million share buyback until later in the year, with chief financial officer Lawrie Tremaine citing the uncertain outlook.

“The argument that they should wait for certainty before resuming a share buyback doesn’t really resonate with us because that very certainty will mean that the share price is higher later and the opportunity to buy back shares at a lower price surely is the opportunity that you would want to take,” said Mr Nayak.

Mr Calabria said Origin will continue to consider a buyback “really actively”, having just completed an earlier $250 million buyback and as it makes decisions about allocating capital supported by strong cash flows.

“We’ve got choices to make: dividends to shareholders, further capital return to shareholders and growth opportunities, and we have still very much got all three live from our perspective,” he said.

Mr Koenders said the decision to reallocated capital to energy markets from APLNG, was “probably not the best one made if they had their time again”.

But Mr Calabria said he had “no regrets” about the APLNG sell-down.

“We want to invest in cleaner energy and renewables, we’ve got a clear path forward, and I feel we’ve got a balanced and diversified business that enables us to navigate the transition and still take a leadership position.”

Origin withdrew its guidance for 2022-23 in early June amid a worsening in the coal supply situation at Eraring and soaring wholesale prices. It advised on Thursday it would provide an update on guidance when there was less uncertainty.

But it said it expects further growth in underlying earnings in energy markets in financial year 2024, adding that improvement depended on fuel and energy prices and the extent to which those were reflected in customer tariffs, the outcome of a review on 50 petajoules of gas supply, as well as the delivery of savings targeted in the retail business.

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