Zacks_Analysts' Blog : ELP Posts Impressive 3Q - Analyst Blog

Companhia Paranaense de Energia (ELP), also known as COPEL, reported its financial results for the third quarter of 2011 on November 9. Net income in the quarter increased 22.1% year over year to R$341.2 million (US$209.3 million), or R$1.25 per share (US$0.76 per ADR).

Revenue                                                                                                                               

In the third quarter, net operating revenues surged 15.3% year over year to R$2,014.1 million (US$1,235.6 million) due to higher sales volume.

Revenue increased on a year-over-year basis in all the categories mentioned below: 4.0% for Electricity sales to final customers; 27.2% for sales to distributors; 23.7% for use of main transmission grid; 9.8% for construction revenue; 18.5% for telecommunications revenue and 21.9% for distribution of piped gas. However, revenue from other sources declined 25.5% year over year.

Expenses/Income

During the quarter, operating costs and expenses went up 15.6% year over year to R$1,649.0 million (US$1,011.7 million), due primarily to a rise in expenses in almost all the categories except for a 20.3% decline registered in material and supplies and 18.3% decline in raw material and supplies for electricity generation.

The company recorded hike in the following categories: 8.7% increase in electricity purchased for resale, 43.5% hike in personnel and management, 15.8% in the use of main transmission grid, 56.2% in natural gas and supplies for the gas business.

EBITDA increased by 10.2% year over year to R$503.2 million (US$308.7 million) with an EBITDA margin of 25.0% versus 26.2% in the year-ago quarter.

Balance Sheet

Exiting the third quarter of 2011, COPEL’s cash and cash equivalents plummeted 11.1% sequentially to R$1,490.5 million (US$814.5 million). Loans, financing and debentures, net of current portion surged 41.7% sequentially to R$2,070.9 million (US$1,131.6 million).

Cash Flow

Net cash flow from operating activities in the quarter was R$413.2 million (US$253.5 million), while capital spending was R$166.9 million (US$102.4 million).

For the fiscal year 2011, COPEL plans to spend approximately R$2,060.5 million, with roughly 49.7% on Generation and Transmission, 45.3% on Distribution and 5.0% 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 provincial government of the State of Paraná controls 58.6% of the shares of COPEL. The company faces stiff competition from Cia Energetica de Minas Gerais (CIG) and Enersis S.A. (ENI).

We currently maintain a Neutral recommendation on the stock.