Fortum Oyj (FOJCF) Q4 2024 Earnings Call Highlights: Strong Divestment Gains and Special ...

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Wed, Feb 12, 2025, 12:03 AM 4 min read

Revenue: Not explicitly mentioned in the transcript.
Comparable Operating Profit: EUR257 million for Q4 2024; EUR1,178 million for the full year 2024.
Comparable EPS: EUR1 per share for the full year 2024.
Operative Cash Flow: EUR167 million for Q4 2024; EUR1,392 million for the full year 2024.
Leverage Ratio: Financial net debt to comparable EBITDA at 0.2 times at the end of 2024.
Dividend Proposal: EUR1.40 per share, including a special dividend of EUR0.50 per share.
Divestment Gains: EUR176 million tax-exempt capital gain from the recycling and waste business divestment.
Optimization Premium: EUR8.7 per megawatt hour in 2024, exceeding the target range of EUR6 to EUR8.
Fixed Cost Reduction Target: EUR100 million by the end of 2025, excluding inflation.
Capital Expenditure: Below EUR500 million for 2024; guidance of EUR1.4 billion for 2025-2027.
Hedge Ratios: 75% for 2025 at EUR42 per megawatt hour; 45% for 2026 at EUR41 per megawatt hour.
Tax Rate: Expected to be in the range of 18% to 20% for 2024.

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Release Date: February 11, 2025

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

Fortum Oyj (FOJCF) achieved a higher optimization premium of EUR8.7 per megawatt hour in 2024, exceeding their target range of EUR6 to EUR8.
The company successfully divested its recycling and waste business for EUR800 million, recording a tax-exempt capital gain of EUR176 million.
Fortum Oyj (FOJCF) maintained a strong balance sheet with a leverage ratio of 0.2 times, indicating financial stability.
The board proposed a dividend of EUR1.40 per share, including a special dividend, reflecting a strong commitment to shareholder returns.
Fortum Oyj (FOJCF) continued to progress in its decarbonization efforts, including the closure of its last coal-fired unit in Suomenoja ahead of schedule.

Negative Points

Comparable operating profit declined both for the quarter and on an annual basis due to lower power prices, particularly affecting the generation segment.
The company's nuclear availability target of 90% was not met, with an actual availability of 84% due to unexpected outages.
Fortum Oyj (FOJCF) faced challenges in achieving its long-term hedging target, with only 18% of the rolling 10-year volume hedged by the end of 2024.
The financial impact of lower nuclear volumes was significant, amounting to tens of millions of euros.
Market conditions and regulatory decisions are not yet favorable for new nuclear investments, delaying potential growth in this area.

Q & A Highlights

Q: Why did Fortum decide to announce a special dividend this year, and how should we think about special dividends going forward? A: Markus Rauramo, CEO, explained that Fortum's balance sheet has strengthened further, and liquidity is very strong. The special dividend stabilizes liquidity and normalizes the balance sheet. Going forward, Fortum will adhere to its 60% to 90% dividend policy, with the special dividend being a one-time event.

Q: What is the timeline for potential new nuclear investments in Sweden and Finland, and what are the key factors influencing these decisions? A: Markus Rauramo, CEO, stated that the Nordic governments are generally supportive of new nuclear projects, but market conditions and regulatory decisions are not yet conducive to making investment decisions. Fortum will provide more detailed findings from its feasibility study in the spring.

Q: What is Fortum's view on the decline in long-term Nord Pool power prices, and how does it affect your hedging and PPA negotiations? A: Markus Rauramo, CEO, attributed the decline to strong hydrology and weather conditions, which have pushed down prices. Fortum continues to hedge to gain short-term visibility and sees mid-term demand for PPAs, especially for the years 2025 to 2029.

Q: How is Fortum addressing the lower nuclear availability, and what was the financial impact in 2024? A: Markus Rauramo, CEO, acknowledged unexpected reactor shutdowns and availability issues, with financial impacts in the tens of millions of euros. Fortum is focused on rectifying these issues and expects improvements in availability.

Q: Can you provide details on the optimization premium achieved in 2024 and the outlook for this metric? A: Markus Rauramo, CEO, reported an optimization premium of EUR8.7 per megawatt hour, above the guidance of EUR6 to EUR8. Fortum feels comfortable maintaining the current guidance, attributing the strong performance to asset availability and flexibility in hydropower.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

This article first appeared on GuruFocus.

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