Despite eye-catching headlines in today’s papers about Origin Energy’s 94 per cent fall in first-half profit, the underlying numbers tell a different story with the energy company reporting a 28 per cent increase in underlying profit to $355 million for the six months to 31 December 2009.
The huge differential between these figures relates to Origin selling its interest in Australia Pacific LNG, which provided an extraordinary gain of $6.7 billion in last half’s profit.
Interestingly, despite increasing competition in the retail electricity and gas markets, Origin managed to increase its underlying retail EBITDA by 7 per cent to $320 million, due to “improved gross profit from natural gas and LPG together with benefits from a lower cost of serving our customers”.
However, a closer look at the retail numbers shows that Origin suffered a customer churn rate of 17 per cent, with churn of electricity customers in the competitive Victorian and Queensland markets being the highest at 26 per cent and 21 per cent respectively. The company lost 236,000 retail customers in the last 6 months but managed to re-acquire 232,000 customers for an overall net loss of 4,000 customers for the period. However, Origin was very fortunate to benefit from the free transfer of 17,000 customers when Jackgreen entered voluntary administration. Without this unexpected boost Origin would have been down 21,000 customers.
Whilst these numbers appear small compared to Origin’s customer base of 2.6 million it does show the significant challenge it faces maintaining its retail market share, especially if it wishes to maintain margins.
If you are interested, you can read more about Origin Energy’s financial results here.