The AGL Energy Ltd (ASX: AGL) share price is under the spotlight after reporting its FY23 result to the market.
AGL is one of the largest energy generators and retailers in Australia.
FY23 result
AGL told investors about some of its highlights for the 12 months to June 2023:
- Underlying EBITDA (EBITDA explained) of $1.36 billion, up 12%
- Underlying net profit after tax (NPAT) of $281 million, up 25%
- Statutory loss after tax of $1.26 billion
- Final dividend of $0.23 per share
- Annual dividend of $0.31 per share
AGL reported such a hefty net loss because of $680 million of after-tax impairment charges because of earlier closure of its coal power stations in line with its accelerated decarbonisation plan.
There was also $890 million of a negative movement in the ‘fair value’ of financial instruments. In other words, items on its balance sheet reduced in value.
In terms of the underlying profit, it had a strong second half thanks to a significant improvement in energy generation availability, as well as a “strong performance” of its “well-managed” gas portfolio and customer business.
AGL has seen continuing customer growth. During the year it added another 56,000 customers to its total base.
Strong guidance for FY24 and outlook for the AGL share price
The company has guided that its FY24 underlying EBITDA is expected to be between $1.875 billion and $2.175 billion – this represents possible growth of between 38% to 60%.
Underlying net profit is expected to be between $580 million and $780 million. This would equate to growth of between 106% to 178%.
There are two key reasons for this positive guidance.
First, there are expected to be sustained periods of higher wholesale electricity pricing, reflected in ‘pricing outcomes’ and reset through contract positions.
Second, AGL is also expecting improved plant availability and flexibility of its energy generation assets, including the start of the Torrens Island and Broken Hill batteries, and there not being forced outages and market volatility impacts from July 2022.
However, some of the benefits are expected to be partly offset by the closure of Liddell Power Station and higher operating costs.
Wholesale electricity ‘forward curves’ currently observed by AGL in the market for FY25 are “broadly in line” with FY24 pricing levels, suggesting that FY25 could be another good year for profit.
The AGL share price has risen strongly this year, so it’ll be interesting to see if it can keep going up in the short-term. But, if earnings can keep rising, then there’s a good chance the AGL share price and dividend can grow in the years ahead.
