RWE AG, Germany's second-largest utility, said first-quarter profit jumped 50 percent after the company earned more trading power in markets including the U.K.
Net income increased to 1.57 billion euros ($2.13 billion), or 2.79 euros a share, from 1.05 billion euros, or 1.86 euros, a year earlier, the Essen-based company said today in an e-mailed statement. Sales were 13.4 billion euros, less than the median forecast of analysts surveyed by Bloomberg.
RWE paid less for natural gas supplies in the U.K., lowering company costs. Better margins in the U.K. and increased trading profit compensated for a milder-than-average winter which capped sales. RWE shares had their biggest gain in four years last week on speculation Electricite de France SA plans to buy the company.
``These numbers are better than the market was expecting and all areas of the company did well,'' said Matthias Heck, an analyst at Sal Oppenheim in Frankfurt who has a ``buy'' rating on RWE stock.
Net income was expected to climb to 1.23 billion euros, according to the median estimate of eight analysts surveyed by Bloomberg News. Sales were expected to rise to 13.6 billion euros.
Prices Fall
RWE and competitors including E.ON AG, Europe's largest utility, have benefited as gas procurement prices fall more quickly than their selling prices. E.ON said on May 9 that first-quarter net income jumped 50 percent to 3.07 billion euros as U.K. gas profit gained and securities sales added to earnings.
``The group generated higher income from the trading business in particular,'' RWE said today in its statement. ``UK subsidiary RWE npower also experienced above-average growth.''
The company reiterated that it expects full-year net income to be lower than a year earlier and said profit excluding one- time items will probably rise about 10 percent.
RWE shares gained 36 cents, or 0.4 percent, to 82.36 euros in Frankfurt. The stock jumped 6.1 percent on May 11, its biggest gain since April 2003, after German radio station SWR said Electricite de France was planning to buy the company.
`Targeted Fashion'
BaFin, Germany's financial services regulator, is analyzing the radio report to determine whether RWE's share price may have been manipulated. The company said yesterday it notified BaFin after indications the report was distributed in a ``targeted fashion.''
Chief Financial Officer Rolf Pohlig reiterated today that the company hasn't seen any evidence that EDF is planning to bid. RWE wants to boost its share price in order to make it a less-attractive target and isn't pursuing other takeover defense plans, Pohlig said today in a conference call with journalists.
Utilities have been the subject of takeover speculation as power providers seek acquisitions ahead of the full opening up of European markets to competition in July. RWE shares jumped in November on reports OAO Gazprom might consider buying part or all of the company.
European utility deals have risen 45 percent this year to $124 billion, compared with $85.7 billion in the same period of 2006, according to data compiled by Bloomberg.
Italy's Enel SpA and Spanish construction company Acciona SA announced a joint bid for Endesa SA last month, valuing Spain's largest power company at 43.7 billion euros.
RWE may also be an attractive acquisition target as divestments generate cash. The company sold its Thames Water unit last year for 4.8 billion pounds to a group led by Macquarie Bank Ltd., as part of Chief Executive Officer Harry Roels' plan to focus on power sales.
The company reiterated today that it aims to sell its American Water Works Inc. unit by the end of 2007. RWE plans to buy back stock once that sale is completed.
To contact the reporter on this story: Thom Rose in Frankfurt at trose5@bloomberg.net
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