Copel's Q3 Earnings Surpass Ests

Companhia Paranaense de Energia (ELP), also known as COPEL, reported financial results for the third quarter 2013 on Nov 8, 2013. The company’s net income in the quarter decreased 14.5% year over year to R$273.0 million (US$119.7 million).

Copel’s earnings per share came in at R$1.00 or 44 cents per ADR. The results mark a decline of 25.4% over 59 cents per ADR reported in the year-ago quarter. However, the result was 3 cents above the Zacks Consensus Estimate of 41 cents.

Revenues

In the third quarter 2013, Copel reported a 10.5% year over year increase in net operating revenues that came in at R$2,254.6 million (US$988.9 million).

Revenue improvement was witnessed in almost all the business categories of COPEL: Electricity sales to final customers grew 45.4% and to distributors grew 7.1%.; construction revenue rose by 99.4%; telecommunications revenues grew 16.5%; distribution of piped gas spiked 19.5%, while revenues from other sources increased 38.3%.

An exception to these was a 33.0% fall in revenues generated from use of the main distribution and transmission grid.

Expenses/Income

Copel reported a year-over-year increase of 15.7% in operating costs and expenses that totaled R$1,964.6 million (R$861.7 million) in the third quarter 2013. The increase was due primarily to higher expenses in the following categories: 13.9% rise in pension and healthcare plans, 27.2% in electricity purchased for resale, 23.6% in natural gas and supplies for the gas business and 106.2% in construction costs.

Higher costs in the above-mentioned categories were partially offset by 47.0% decline in costs related to use of main distribution and transmission grid, 17.8% in personnel and management, 14.4% in materials and supplies, 25.7% in materials and supplies for power electricity and 27.7% in provisions and reversals.

EBITDA decreased 6.1% to R$463.3 million (US$203.2 million) with an EBITDA margin of 20.5% versus 24.2% in the year-ago quarter.

Balance Sheet

Copel’s cash and cash equivalents fell 2.5% sequentially and came in at R$1,531.8 million (US$686.9 million) exiting the third quarter 2013. Loans, financing and debentures also went down sequentially to the extent of 2.4% and came in at R$2,662.5 million (US$1,193.9 million).

Cash Flow

Copel in the quarter generated roughly R$275.5 million (US$120.8 million) cash flow from operating activities, down 49.4% year over year. Capital spending on the purchase of property, plant and equipment was R$127.0 million (US$55.7 million), reflecting a 42.4% decline from the year-ago quarter.

For the year 2013, Copel plans to spend approximately R$1,922.8 million, with roughly 45.1% on Generation and Transmission, 51.3% on Distribution and 3.6% on Telecommunications.

Companhia Paranaense de Energia is a fully integrated electric utility of Brazil engaged in the generation, transmission, and distribution of electricity to the State of Paraná. The stock currently has a Zacks Rank #4 (Sell).

However, stocks to watch out for in the industry are NRG Yield, Inc. (NYLD) and Tractebel Energia S.A. (TBLEY), both with a Zacks Rank #1 (Strong Buy) and Alliant Energy Corporation (LNT) with a Zacks Rank #2 (Buy).

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