German utility E.On, which is trying to acquire Spain's Endesa in a 41 billion euro ($53.71 billion) deal, on Wednesday reported a 32% drop in net profit in 2006 from the year before, when the bottom line was bolstered by special items.
The Duesseldorf-based company said it earned 5.06 billion euros ($6.63 billion) in 2006, down from 7.41 billion euros the year before, when it booked gains on the Viterra and Ruhrgas Industries disposals. The figure was higher than the average 4.54 billion euros ($5.95 billion) forecast by 10 analysts polled by Dow Jones Newswires.
By comparison, adjusted net income came in at 4.4 billion euros ($5.76 billion), up 20% from the previous year's 3.6 billion euros.
The company said it expects a "slight increase" in net income in 2007.
Adjusted full-year 2006 earnings before interest and taxation came in 12% higher than at 8.15 billion euros ($10.68 billion) compared to 7.29 billion euros in 2005. Analysts had predicted 8.09 billion euros ($10.6 billion).
E.On had 2006 sales of 67.76 billion euros ($88.77 billion), up from 56.14 billion euros ($73.54 billion) in 2005 and higher than the 67.54 billion euros ($88.48 billion).
The company did not break out fourth-quarter figures.
Ahead of the earnings report, E.On said late Tuesday that it had withdrawn a key condition of its bid for Endesa, backing off a demand that the utility remove a 10% cap on voting rights for shareholders after Italy's Enel snapped up shares in the Spanish company.
E.On said that the remaining condition for the takeover -- that it acquire shares amounting to at least 50.01% of Endesa's capital stock -- "remains unchanged."
CEO Wulf Bernotat on Wednesday told shareholders the company was determined to stay on track with the Endesa bid.
"We're working with undiminished energy to convince Endesa shareholders about our offer," he said. "Only our offer is open to all Endesa shareholders, including the many private investors, and we have a clear strategy for Endesa's future which will enable it to develop successfully in the marketplace."
Spain Blocks E.On's Bid
Spain's Socialist government initially attempted to block E.On's bid, preferring a competing bid from Spain's Gas Natural and imposing a slew of conditions on any possible takeover.
On Wednesday, EU regulators threatened legal action against Spain if the country did not withdraw the remaining conditions, saying the previous modifications were "not sufficient to comply fully" with EU competition rules.
Gas Natural has meantime bowed out of the running, though E.On's bid has now been complicated by Enel's move to acquire more than 20% of Endesa. Spain's Acciona, which has opposed E.On's offer, also holds more than 20%.
Bernotat also announced that E.On has submitted proposals to the European Commission on cooperation between transmission system operators and regulators.
"We need to take bolder steps towards a European energy market," he said. "We therefore propose creating a core energy market in continental Europe consisting of the Benelux countries, France, Austria, Switzerland and Germany and gradually expanding it into an EU-wide energy market."
Bernotat added that he felt the planned Endesa takeover would be good for a common European energy market.
"A combination of E.On and Endesa would actively foster the integration of what until now have been regional energy markets," he said.
The company also said it planned price cuts in the coming months for resellers and industrial customers in Germany and the U.K. Residential gas prices will be reduced 16% in the U.K. and by 8.4% in Germany, the company said.
"The key factor is the decline in oil prices seen in recent months, which is benefiting consumers," E.On said.
E.On shares were up in afternoon Frankfurt trading by 1.64% to 98.30 euros ($128.77).