All major European utility companies have released their half-year results. Richard Brakenhoff , market analyst and industry specialist at NedZero, concludes that although electricity prices fell between 28 – 58%, in the first half of 2024 compared to the first half of 2023 gross and net profit increased. This was one of the best periods. Here is his analysis.
Sales decline
European energy companies' revenues fell by 20% to EUR 224 billion in the first half of 2024 compared to the first half of 2024 (see chart below).
Where turnover peaked at EUR 365 billion in the first half of 2022 due to the impact of Russia's invasion of Ukraine, turnover levels are starting to move more towards pre-Covid-19 levels. Turnover has fallen so sharply because electricity prices in Europe have fallen further sharply (see 2nd graph) by an average of around 42% compared to the first half of 2023.
This decline was partly offset by higher electricity sales.
Sources: Ørsted, Vattenfall, RWE, Iberdrola, Enel, EDF, EDP, Engie, Stattkraft, Fortum, EnBW, CEZ
Increase in net profit margin
It is striking that European utility companies in this more 'normal' electricity market have been able to significantly increase their profit margins thanks to an even greater drop in the costs of producing electricity.
Net profit margin went from 8.8% in the first half of 2023 to 11.4% in the first half of 2024. The sector benefited from higher volumes. Better wind conditions also helped.
The graph below shows that high electricity prices do not automatically mean that utility companies can achieve higher profit margins, the opposite seems to be true.
Indicative trend of European Wholesale electricity price (EUR/MWh) versus net profit margin:
