TNB’s 1Q profit dampened by impairment losses

The power utility posts a 26.4% YoY fall in net pro t to RM1.6b for the quarter

by MARK RAO / pic by MUHD AMIN NAHARUL

Tenaga Nasional Bhd’s (TNB) higher impairment losses and tax expenses hit its rst-quarter (1Q) earnings and offset the higher revenue achieved in the period.

The power utility posted a 26.4% year-on-year (YoY) fall in net profit to RM1.56 billion in the period ended March 31, due to a net loss on impairment of financial instruments amounting to RM279.7 million.

It also incurred higher finance costs of RM704.5 million — up 80.1% YoY — and higher total taxation and zakat of RM552.4 million in the period versus RM298.6 million a year ago.

This brought the company’s effective tax rate to 26.6% in the 1Q — higher than the statutory tax rate of 24%— due to expenses that were not deductible for tax purposes.

Impairments for international investments and the return of some regulatory adjustments also weighed on the earnings.

Its 1Q revenue grew 7.9% YoY to RM13.24 billion on the increase in electricity sales, which rose 7.8% to RM13.01 billion to comprise 98% of total group revenue for the quarter. 

Hot weather conditions in Malaysia led to the increase in electricity usage, it stated in its exchange filing yesterday.

Returns on regulated business under the Incentive-Based Regulation framework — primarily consisting of the transmission and distribution businesses — came in at RM708.5 million.

TNB sees its 1Q performance as positive, given the restructuring of its internal business to increase productivity.

This is in view of its expansion plans which include venturing into unregulated businesses such as rooftop solar photovoltaic systems and high-speed broadband.

Newly appointed president and CEO Amir Hamzah Azizan said TNB will focus on strengthening its current domestic and international assets, while taking steps to manage foreign-exchange (forex) losses.

“Given the current economic climate, we are focusing on strengthening our businesses and position in the countries in which we operate, by taking prudent positions on investments and ensuring the business models in those countries are on sound footing as well,” he stated in a release yesterday.

“TNB has taken the bulk of its impairments and is exploring hedging options to mitigate forex losses as part of its plan to mitigate consequential financial impacts from the investments.”

The company will be guided by the target to grow its renewable energy (RE) capacity to 1,700MW by 2025 from both domestic and international assets.

This will be driven domestically by its wholly owned unit, TNB Renewables Energy Sdn Bhd, which is exploring growth in utility-scale and small-scale RE assets, as well as retail self-generation platforms.

Internationally, TNB is aiming to grow its RE capacity in new markets that promise strong growth.

The company is now present in the UK, Turkey, Kuwait, Saudi Arabia, Pakistan, India and Indonesia.

TNB expects positive longterm return on investments from Turkey on anticipation of growing electricity demand there, while investments in India are expected to benefit from intensifying electricity utilisation.

TNB expects its performance for the remainder of the year to be stable on a steady, but moderating domestic economy.