TNB 4Q17 earnings fall on higher operating expenses

Decline in operating profit is ‘partly due to the higher opex during the current quarter


Tenaga Nasional Bhd (TNB) recorded a net profit of RM1.72 billion for the fourth quarter ended Aug 31, 2017 (4Q17), down 2.3% from RM1.76 billion posted a year ago.

This was a result of lower operating profit during the quarter under review, which fell 14% to RM2.33 billion from RM2.71 billion the year earlier.

The decline in operating profit was “partly due to the higher operating expenses (opex) during the current quarter compared to the preceding quarter”, TNB said in an exchange filing yesterday.

TNB’s 4Q revenue climbed 10.9% to RM12.46 billion from RM11.24 billion registered in the same period last year, which was consistent with the 13.4%, or RM1.25 billion increase in opex during the current quarter.

For the financial year ended Aug 31, 2017 (FY17), TNB’s net profit slid 6.3% to RM6.9 billion from RM7.37 billion recorded the year earlier.

“This was mainly due to the increase in finance cost from the new borrowings acquired during the year and the increase in deferred taxation expense attributed to higher capitalisation of assets,” the national electric utility provider said.

Its FY17 revenue improved by 6.5% to RM47.42 billion compared to RM44.53 billion accumulated in the previous year, consistent with the increase in opex by 8%, or RM2.9 billion in the current year.

The return for regulated business under the Incentive Based Regulation (IBR) frame-work, which mainly consists of transmission and distribution businesses, was recorded at RM4.5 billion for the current period.

The group has also forecast its prospects for FY18 to remain stable, in line with expectations for the national economy to continue its positive trajectory.

It noted that the Malaysian Institute of Economic Research has projected the growth outlook for 2018 to remain between 4.7% and 5.3%, while its growth forecast for 2017 has been revised upwards to 5.4%.

“This is evident by the improved performance of the manufacturing index and major export-oriented sub-sectors in the first half of 2017. As such, it is expected that the unit electricity demand growth will be stable,” TNB said.

It added that continual implementation of IBR also allows better earnings predictability for the utility provider, as fuel costs risks are mitigated.

In a separate filing, the company announced that it will adopt a new dividend policy with effect from FY17.

It will distribute dividends based on a 30% to 60% dividend payout ratio based on the reported consolidated net profit attributable to shareholders after minority interest, excluding extraordinary, non-recurring items.

“It is the policy of the board in recommending dividends to allow shareholders to participate in the company’s profits, as well as to retain adequate reserves for future growth,” it said.

While the dividend policy reflects the board’s current views on the group’s financial and cashflow positions, the dividend policy will be continuously reviewed from time to time in light of TNB’s financial position, regulatory environment and business prospects.

“TNB endeavours to adopt a dividend policy that would provide stable and sustainable dividends to shareholders while maintaining an efficient capital structure and sufficient to cater to its business prospects, capital requirements growth or expansion strategy, and other relevant factors,” the group said.