TNB 3QFY15 net profit plunges 51% on recognition of ICPT tariff rebates

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KUALA LUMPUR (July 30): Tenaga Nasional Bhd (TNB) saw its net profit more than halve to RM789.4 million or 13.99 sen per share for its third financial quarter ended May 31, 2015 (3QFY15) from RM1.63 billion or 28.83 sen per share a year ago, due to the recognition of the imbalance cost pass through (ICPT) tariff rebates during the quarter.

In a filing with Bursa Malaysia today, the national utility said its profitability was affected by the recognition of ICPT tariff rebates amounting to RM1.82 billion for the period from Jan 1, 2014 until May 31, 2015.

"The reporting of the over-recovery amount in TNB’s financial statements for the first time was done after a thorough review and deliberation between TNB and the relevant parties," it said a separate statement.

Quarterly revenue fell 14% to RM9.91 billion from RM11.5 billion in 3QFY14, despite reporting higher sales of electricity during the period, which was attributed to better sales in Peninsular Malaysia.

The ICPT is a mechanism which allows TNB to reflect the difference between its generation costs and the electricity tariff every six months. The ICPT savings will be passed on to consumers in the form of 5.8% and 3.5% tariff reductions in Peninsular Malaysia and Sabah respectively, from March 1 to June 30, 2015.

For the nine months period (9MFY15), TNB’s net profit climbed 4% to RM5.3 billion or 93.87 sen a share from RM5.11 billion or 90.56 sen a share in 9MFY14, mainly contributed by the tariff review effective Jan 1, 2014.

Revenue for 9MFY15 rose 2% to RM31.54 billion from RM31.07 billion in 9MFY14.

The average coal price for 9MFY15 was recorded at US$67.3 per tonne compared with US$76.5 per tonne for 9MFY14.

Going forward, TNB said it remains cautious on its prospects for the remainder of its current financial year ending Aug 31, 2015 (FY15) as the group continues to be impacted by uncertainties in the global economic environment and the depreciating ringgit.

“The board of directors took note of Bank Negara Malaysia’s monetary policy statement dated July 9, 2015, which recognises that there are heightened risks to global growth and financial conditions which may have implications on macroeconomic stability and the prospects of the Malaysian economy.

“Given the said prevailing global economic environment and continuous foreign exchange volatility, the board remains cautious on the group’s prospect for FY15,” said TNB.

TNB (fundamental: 1.3; valuation: 1.8) shares fell 2 sen or 0.16% to close at RM12.12 today, giving a market capitalisation of RM68.4 billion.

(Note: The Edge Research's fundamental score reflects a company’s profitability and balance sheet strength, calculated based on historical numbers. The valuation score determines if a stock is attractively valued or not, also based on historical numbers. A score of 3 suggests strong fundamentals and attractive valuations.)