The AGL Energy Ltd (ASX: AGL) share price is up more than 4% after announcing significant profit growth in FY24.
AGL is one of Australia’s largest energy generators and energy retailers.
FY24 result
Here are some of the highlights for the 12 months to 30 June 2024:
- Underlying EBITDA rose 63% to $2.2 billion
- Underlying net profit after tax (NPAT) rose 189% to $812 million
- Statutory net profit after tax of $711 million
- Final dividend of $0.35 per share, up 52%
- Full-year dividend of $0.61 per share, up 97%
Total AGL customer services of 4.5 million was an increase of 211,000 compared to FY23. Total generation volume was 34.1 TWh, down 8% year on year, largely due to the closure of the last three units at Liddell Power Station in April 2023.
AGL pointed out that the development pipeline almost doubled to 6.2GW since its climate transition action plan was released in September 2022.
The company benefited from higher wholesale electricity pricing from prior periods, being reflected in pricing outcomes, trading and contract positions.
Profit margin growth helped increase its profitability and helps it invest in the transition as well as paying larger dividends to shareholders. It’s also working on a transformation program with Kaluza.
The statutory net profit was impacted by a pre-tax negative movement in the fair (market) value of financial instruments of $53 million, which was primarily the impact of expired positive cash flow trades. There were also significant items of negative $103 million.
AGL also announced today that Chair Patricia McKenzie will retire after the release of the FY25 half-year result. The board has appointed Miles George as Chair-elect.
Firm Power and Terrain Solar acquisition
AGL has entered into a binding agreement to acquire Firm Power and Terrain Solar for $250 million, funded from cash on the balance sheet.
Firm Power is a Battery Energy Storage System (BESS) developer with 21 projects in development, while Terrain Solar is a solar project developer with six projects in development.
In terms of the pipeline, there are 6.1GW of grid-scale BESS projects, with 2.7GW in Queensland and 2.3GW in NSW. There are 1.8GW of solar projects, including 1.1GW in Queensland and 0.5GW in NSW. There is also a 250MW onshore wind project in NSW.
Those mid-sized BESS projects range from 200MW to 500MW, between two-to-eight-hours storage duration.
Outlook for the AGL share price
Profit is expected to fall significantly in the coming 2025 financial year.
In FY25, it’s expecting underlying EBITDA of between $1.87 billion to $2.17 billion. The underlying net profit after tax is expected to be between $530 million to $730 million, representing a double-digit decline.
AGL explained there are a few reasons for the projected decline, including lower wholesale electricity prices resetting through contract positions, the roll-off of heightened volatility from market interventions in mid-2022, consumer margin compression, broadly flat operating expenses and increased depreciation and amortisation.
AGL is expecting productivity and business optimisation benefits broadly offsetting the ongoing funding of strategic growth initiatives as well as inflationary impacts.
It’s a good thing to see AGL investing in the transition, and it’s probably a smart idea to invest heavily in energy storage because this could allow the business to sell energy during higher-priced times of the day (such as the evening/night when the sun isn’t shining). However, a forecast of profit decline in the short-term may not excite investors. There are a number of other ASX dividend shares I’d rather buy first at the current AGL share price.
