AGL Energy forecasts lower than expected 2026 profit, shares slump
Citing higher operating and finance costs as well as competitive pressure on margins, AGL forecast a fiscal 2026 underlying profit of between A$500 million ($326 million) and A$700 million.
That compared to the Visible Alpha consensus estimate of A$667.8 million. It also compares to the A$640 million it earned in the year ended June 30, which was sharply below last year's net profit of A$812 million.
Earnings were pressured by lower wholesale electricity prices and retail margins, exacerbated by its decision not to fully pass through the year-on-year cost increases to customers to help ease their affordability pressure.
"We expected a decrease in earnings compared to FY24 due to lower wholesale electricity prices resetting through contract positions, and consumer customer margin compression," the firm said in a statement.
AGL declared a final dividend of 25 Australian cents per share compared to the 35 cents it paid in the previous year, pushing its full-year payout ratio to the lower end of its forecast 50% to 75% range.
The company's shares fell as much as 13.3% to A$8.86 by 0112 GMT, their weakest trading session since mid-October 2007. The stock hit its lowest level since April 17, 2024.
AGL is attempting a major pivot to renewable energy, including targeting final investment decisions for 900 megawatts (MW) of grid-scale battery projects.
It cited the need to conserve capital for construction of its Liddell and Tomago battery projects as one of the reasons for the lower dividend.
Analysts at Jefferies see the lower underlying profit guidance as an area of concern, "particularly if the market remains of the view that management will be unable to offset the headwinds of recontracting gas and coal in 2027", they wrote.
($1 = 1.5321 Australian dollars)
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