Finnish energy company Fortum Oyj (OMX: FUM1V) lived up to market expectations with comparable operating profit toppling half a billion € in Q4 2011 and EPS of 47 cents. Full-year operating profit is a hair over 1.8 billion and EPS stands at 1.99, which includes some considerable non-recurring items such as the divestment of the shares in Fingrid Oyj. Fortum is proposing to keep its dividend at 1 Euro per share, corresponding to nearly 6% yield at current stock price. This is in line with the company policy to distribute 50-60% of annual net profit as dividends.
Fortum Oyj estimates 57 million in distribution costs from Tapani and Hannu storms, which at worst had nearly 190 000 Fortum customers without electricity simultaneously in Finland and also did considerable damage in Sweden. The major 2011 earthquake in Japan and the following backlash against nuclear power generation had big implications for Fortum going forward. The company has been looking to replace its existing reactors and even invest anew and now finds it harder politically to get the permits necessary to do so. The company wants to mitigate the effects of climate change and move towards Solar Economy.
Normally in times of economic certainty Fortum, as a company that has both a product that is relatively essential albeit somewhat sensitive to economic activity and the ability to pass on inflation to customers without delay, would fare fairly well but the issues mentioned above, as well as the uncertainty of the viability of its investments in Russia and in renewable energy, have caused the stock to lag. The company is speeding up the investment program in Russia and says it is progressing very well.
Most recently the electricity spot price in Nord Pool had been at a five-year low as water reservoir levels have been at a high level. Current extremely cold weather has made the prices spike in the last couple of days. Fortum’s stock is up more than 5% to trade above 17.5 Euros.
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