TNB 1Q net profit up 34.4% on higher electricity sales from tariff hike

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KUALA LUMPUR (Jan 22): Tenaga Nasional Bhd (TNB) posted a 34.4% rise in net profit to RM2.35 billion for its first financial quarter ended Nov 30, 2014 (1QFY15), from RM1.75 billion a year ago, on improved electricity sales following a tariff hike last year.

Revenue rose by 15.2% to RM11.03 billion from RM9.57 billion in 1QFY14, attributable to the increase in the average electricity tariff in Peninsular Malaysia and Sabah.

“The group recorded a 18.5% or RM1.68 billion improvement in sales of electricity from RM9.08 billion to RM10.76 billion. The improvement was mainly from sales of electricity in Peninsular Malaysia and Sabah, which each recorded an increase of 19.2% and 20.7%,” said TNB (fundamental:1.3; valuation:1.0) in its financial results announcement to Bursa Malaysia today.

On Jan 1, 2014, the average electricity tariff in Peninsular Malaysia and Sabah was increased by 14.9% and 16.9% respectively.

In a separate statement, TNB said it had invested RM2.51 billion on capital expenditure in 1QFY15, up 73.2% from a year ago.

It noted that for the quarter under review, Peninsular Malaysia recorded unit electricity demand growth of 3.3% year-on-year, mainly contributed by the commercial and industrial sectors.

“Operating expenses for 1QFY15 increased by 3.6% to RM8.42 billion compared with RM8.12 billion in 1QFY14,” said TNB, adding that this was partly attributed to higher generation costs which resulted from higher liquefied natural gas (LNG) cost.

TNB president and CEO Datuk Seri Azman Mohd remarked that the group entered the first regulatory period under the Incentive Based Regulation (IBR) starting Jan 1, 2015, amid changing global economic environment.

Movements in economic factors such as currency fluctuations and interest rates will impact TNB and the power industry in general.

“As the group faced new challenges in the new environment, we will not lose our resolve to continuously ensure that the lights are on; and we will do this through efficient operations with enhanced transparency in the operational, financial and technical performance aspects of the company as mandated under the IBR,” said Azman.

TNB said it is cautious on the group’s prospect for FY15 in light of prevailing global economic conditions and volatility of foreign exchange impacting the Malaysian economy.

In a separate filing with Bursa today, TNB said the board had approved the extension of service of its non-executive chairman Tan Sri Leo Moggie for an additional two years until March 11, 2017.

TNB shares closed 2 sen or 0.14% higher at RM14.52 today, for a market capitalisation of RM81.95 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.)