Fortum Oyj (OTC) ((FOJCY)) has held its Q4 earnings call. Read on for the main highlights of the call.
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Fortum Oyj’s recent earnings call conveyed a predominantly positive sentiment, underscoring the company’s robust financial stability and strategic advancements, particularly its successful divestments and decarbonization efforts. However, challenges such as lower power prices and nuclear availability issues were also acknowledged, suggesting areas for operational improvement.
Strong Financial Performance and Strategy Execution
Despite facing challenging market conditions, Fortum successfully achieved a good power price level in 2024. This was made possible through adept hedging and physical optimization, resulting in an optimization premium of €8.7 per megawatt hour, surpassing the targeted range of €6 to €8.
Significant Divestments and Capital Gains
Fortum’s strategic divestments have been noteworthy, with the sale of its recycling and waste business for €800 million, leading to a tax-exempt capital gain of €176 million. Additionally, the company divested a solar portfolio in India for €33 million, recording a sales gain of €16 million, further strengthening its financial position.
Financial Stability and Shareholder Returns
The company’s financial stability was highlighted by a reduction in leverage to 0.2x by the end of 2024. Fortum proposed a dividend of €1.40 per share, complemented by a special dividend of €0.50 per share, underscoring its commitment to delivering value to shareholders.
Progress in Decarbonization and Renewable Energy
In its decarbonization journey, Fortum made considerable strides, notably in its Espoo Clean Heat program. The company closed its last coal-fired unit in Suomenoja ahead of schedule and commissioned the Pjelax wind farm in Finland, marking significant progress in its renewable energy initiatives.
Decline in Comparable Operating Profit
Fortum experienced a decline in comparable operating profit, which fell to €257 million in Q4 2024 and €1,178 million for the full year. This was primarily attributed to lower power prices adversely affecting the Generation segment.
Lower Nuclear Availability
The company faced challenges with nuclear availability, which was recorded at 84% in 2024, below the target of 90%. Unexpected reactor shutdowns and availability issues were cited as factors impacting financial results.
Hedging and Market Conditions
Fortum’s hedged share of rolling 10-year Generation volume was 18%, falling short of the target of at least 20% by 2026. This reflects the current difficulties in securing long-term power purchase agreements (PPAs) at favorable prices.
Forward-Looking Guidance
Looking ahead, Fortum outlined its strategic focus on optimizing core operations, divesting noncore assets, and implementing efficiency improvements throughout 2024. The company aims to bolster future growth, despite challenging weather conditions and Nordic power price pressures. Key objectives include reducing annual fixed costs by €100 million by 2025 and preparing for growth with a 2026 fixed cost base target of approximately €850 million.
In conclusion, Fortum’s earnings call highlighted a positive financial outlook driven by strategic divestments and progress in decarbonization. While operational challenges such as lower power prices and nuclear availability persist, the company’s forward-looking strategies aim to strengthen its financial position and growth prospects.
