MADRID—Spain’s largest power utility Iberdrola SA and flagship wind-turbine maker Corporacion Tecnologica Gamesa SA cut some financial targets for 2012, citing weak economic conditions in developed markets.
Iberdrola, Gamesa’s top shareholder, said profit growth for 2012 would come in at the low end or just below targets it set earlier. The electricity utility, a pioneer in Spain’s controversial move toward renewable energy, said its recurring net income would increase this year slightly below the targeted 5% to 9% compound annual growth rate for 2010 through 2012.
The company said higher taxes in Spain and a souring economic outlook in Europe will take a greater toll than previously expected, pushing the company to focus more on cost controls.
Earnings before interest, taxes, depreciation or amortization, or Ebitda, will grow about 5% in 2012, at the low end of the same range as that of income growth, the company said.
The tepid outlook comes as Spanish energy companies, facing an economy in their home market that is again contracting, work to increase their presence in other faster-growing countries.
Gamesa, which said 2011 profit rose 1.8% on Thursday even as it cut its sales target for 2012, sold 8% of its turbines in Spain last year, compared to 39% three years earlier. Its largest markets now are China and India.
Iberdrola has its eyes set on growing in Brazil. In a conference call with investors, Iberdrola Chairman IIgnacio Sánchez Galán said the company in the next few months hopes to wrap up talks with other shareholders of Brazilian utility Neoenergia SA to accumulate a majority stake. He added that he hopes to combine the Neoenergia business with Elektro, the Brazilian utility it bought in 2010.
However, in 2011, declines in profit in the liberalized business, which includes sales of electricity to households and industrial users in economically weak Spain and the UK, helped to more than offset gains from Iberdrola’s internationalization strategy.
Iberdrola’s net profit for the fourth quarter declined more than 17% to €661.6 million ($876.6 million) from a year earlier, weighed down by falling demand. Mild weather at the end of the year also played a role in diminishing the production of generally more-profitable wind power.
Overall in 2011, net profit decreased 2.3% to €2.8 billion, hurt by dramatically higher taxes, particularly in Spain, and €402 million of write-downs related to the development cost of renewable-energy projects that have been abandoned, and revised estimates of capacity use at a coal-fired plan in the U.K.
Higher prices in some of its businesses and the incorporation of Elektro helped Iberdrola boost revenue 4% to €31.6 billion in 2011.
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