GDF Suez holds targets despite profit fall, shares rise

GDF Suez, a world-ranking producer of electricity and gas, held to its annual targets on Thursday despite a 26.0-percent fall in net profit in the first half of the year. The group said that the depressing effect of general economic conditions on its performance had been countered only in part by cold weather which raised demand for heating. The net figure fell to 1.7 billion euros ($2.25 billion), pushed down by a write-down of 441 million euros for mainly European assets. However, recurrent profit, excluding exceptional items, fell by only 1.7 percent to 2.4 billion euros. Sales dipped by 1.5 percent to 42.6 billion euros. The group held to its target for recurrent net profit of 3.1-3.5 billion euros. At brokers Citi, analysts welcome a \"solid series of results\", and the price of the shares in the group was showing a gain of 4.88 percent to 16.54 euros in late morning trading. The French market overall was up 0.10 percent. The company said that it would pursue a rigorous review of its European assets and asset sales with an announcement expected within a few weeks which would reduce further its exposure to the production of thermal electricity in Europe. Chief executive Gerard Mestrallet said: \"We are accelerating our transformation to protect the group from the worsening of the European energy market.\" The company said in a statement that the economic climate remained difficult and uncertain, notably regarding the production of electricity in Europe where \"depressed market conditions so far show no sign of improving\". The group is in effect caught between excess global capacity to produce electricity and a crimping of demand owing to weak economic growth. GDF Suez is heavily involved in the production of electricity from natural gas. This activity is undermined by a rise in the competitive position of coal, and this has forced the group to close or suspend operations at several gas power plants in France and in Europe.The group also suffered from a lengthy closure of two nuclear reactors in Belgium up to June this year over safety concerns. This reduced earnings before interest, tax, depreciation and amortisation (Ebitda) by 318 million euros during the first half. However, Mestrallet told a telephone press conference that the group had achieved a \"good performance despite a poor economic context in Europe\" and had turned in results which were better than expected. Severe winter weather in France and much of Europe, and a cold spring, had raised demand for energy and boosted Ebitda earnings by 369 million euros. The group was also boosted by accelerated development in emerging countries and by action to cut costs, by a reform of gas tariffs in France and by a renegotiation of contracts with big suppliers of gas. The company has reached an agreement with Norwegian energy group Statoil and has reached a \"very favourable\" outcome in talks with Russian group Gazprom. With the help of a bond issue at the beginning of July, and by separating debt owed by Suez Environnement of which GDF Suez owes 36.0 percent, group debt had been cut by a third in six months to 30 billion euros, 18 months ahead of target.