Australia's second largest energy company increased its net profit in the December half by 18 per cent to $308 million.
Investors were impressed, given that electricity demand has been falling for some time, pushing the share price 62 cents, or 4.3 per cent, higher to $15.08.
Outgoing chief executive Michael Fraser, in his last day in the job, said competition remained fierce in retail markets but AGL had resisted the temptation to match competitors in discounting.
The company flagged last year that it planned to tailor products to retain its highest value customers: keeping long-term and high energy users happy rather than everyone.
“We’ve continued to remain very disciplined around our discounting and margins management, continuing to focus on value and margins ahead of market share for market share’s sake,” Mr Fraser said on Wednesday.
AGL’s retail customer numbers fell by about two per cent between June 30 and December 31 and energy use per customer also dropped.
The retail division was also helped by a cooler Australian winter and lifted pre-tax profit by 17 per cent to $159 million.
AGL’s merchant energy, or power generation, division lifted pre-tax profit by 23 per cent to $654 million.
The newly acquired former NSW state-owned Macquarie Generation added $51 million to that.
Mr Fraser forecast a positive outlook for wholesale electricity prices over the next three years but was more subdued about its retail prospects.
It retained guidance for an underlying full year net profit of $575 million to $635 million.
“We continue to see subdued average consumption per customer and we see it continuing,” Mr Fraser said.
“We see the high levels of competition continuing in the retail market against the backdrop of soft wholesale electricity market conditions outside of Queensland so far this summer.”
Wholesale power generation would be helped by soaring gas prices, especially in Queensland where the start of LNG exports will reduce supply.
Morningstar senior resources analyst Gareth James said the result vindicated AGL’s strategy of investing billions in wholesale power generation, including coal fired power stations in NSW and Victoria.
Conversely, Mr Fraser said he did not expect to see much new investment in renewable energy in Australia for now, saying political agreement was needed on a revised renewable target.
AGL PROFITS MORE ON LESS DISCOUNTS
- First half net profit of $308m, up 18 pct from $261m in 2013/14
- Revenue of $5.2b, down two pct from $5.3b
- Unchanged fully franked interim dividend of 30 cents per share