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E.ON profit declines
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May 18, 2001: 4:39 a.m. ET
German utility's earnings suffer as it reorganizes to become a world leader
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LONDON (CNN) - German electricity utility giant E.ON said first-quarter net income dropped 79 percent in the absence of last year's big asset-sale gains.
E.ON, which was formed from the merger of German power companies Veba and Viag, said net profits fell to  587 million ($519 million) in the first quarter to March 31 from 2.8 billion in the same quarter of 2000.
The company is offloading non-core businesses to concentrate on power. It is also expanding abroad as competition increases in the liberalized domestic market and last month paid 15.3 billion for the UK's Powergen.
This acquisition will make E.ON the second-largest power utility in the world and Powergen's Kentucky-based subsidiary, LG&E Energy, will give E.ON access to the world's largest energy market.
Last year's net income figure included gains from the sale of telecoms shareholdings in E-Plus for 3.5 billion and Cablecom for 800 million. This is the main reason for the significant decline in first-quarter 2001 earnings, the company said.
Operating profit surged 37 percent in the quarter, however, to 949 million from 693 million, E.ON said, with strong earnings coming from units it may eventually sell: oil business VEBA Oel, the Stinnes transportation and chemicals unit and VAW aluminium.
Profits from the power division edged down, E.ON said. The company blamed the drop on higher fuel costs as well as increased costs related to energy laws.
The higher costs could not fully be offset by increased sales volumes and slightly higher electricity prices, E.ON said. But the company expects the business to move forward during the rest of the year.
"Based on developments during the first three months of 2001, E.ON expects group internal operating profit for full-year 2001 to surpass the previous year's figure significantly, though at a lower rate of increase compared with the first quarter," E.ON said.
E.ON (FEOA) shares rose 0.5 percent to 56.30 in early Frankfurt trading. 
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