Australian power producer AGL Energy topped first-half profit estimates on Wednesday and narrowed the lower end of its full-year earnings forecast, as improved retail margins helped cushion softer market conditions.
Shares of the company rose as much as 9.6% to A$9.7, their highest level since December 3, with Sandstone Insights analysts calling it a relief rally on market concerns surrounding lower wholesale electricity prices.
AGL expects the full-year forecast range for underlying net profit after tax to be between A$580 million and A$680 million ($410.23 million and $480.96 million), compared with its previous range of between A$500 million and A$700 million.
The mid-point of the new range comfortably beats the Visible Alpha consensus estimate of A$589.5 million.
AGL attributed the adjustment to stronger consumer margins in the first half, along with lower-than-expected operating costs and depreciation.
The company, Australia's largest corporate carbon emitter, is also targeting A$50 million of sustainable net operating cost reductions in FY27.
"The new cost-out programme implies a nearly 7%-8% reduction in group costs, which should lift earnings to mid-single digits from fiscal 2027," Sandstone Insights analysts said.
First-half underlying profit attributable came in at A$353 million, down from A$377 million a year earlier but ahead of the consensus forecast of A$307.4 million.
AGL said improved availability and flexibility of its generation assets, along with better battery performance, helped counterbalance lower market volatility caused by milder weather and fewer transmission constraints.
The Melbourne-headquartered firm also declared an interim dividend of 24 Australian cents per share, above the 23 Australian cents declared last year.
AGL also entered into a long-term partnership with Aussie Broadband to divest its telecommunications business in exchange for proceeds of about A$115 million of shares in the internet service provider's shares.
The company aims to simplify its customer operations and reduce ongoing costs through the transaction.
Customers will be able to bundle their AGL energy and telco services, while also gaining access to Aussie Broadband's customer service and products, AGL said.
The issuance of shares to AGL is expected to occur in June 2026, to coincide with the migration of AGL's customers to Aussie Broadband, it added.
($1 = 1.4138 Australian dollars)
(Reporting by Sherin Sunny and Shivangi Lahiri in Bengaluru, additional reporting by Nichiket Sunil; Editing by Vijay Kishore and Sherry Jacob-Phillips)
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