Origin share price higher on earnings guidance update

The Origin Energy Ltd (ASX: ORG) share price has started the day positively.

In morning trade, the energy company’s shares are up 1% to $5.78.

Why is the Origin share price rising?

Investors have been bidding the Origin share price higher today after the company released energy markets earnings guidance for FY 2023 and FY 2024.

As a reminder, the company was previously guiding to energy markets underlying EBITDA of $600 million to $850 million for FY 2023. However, this guidance was withdrawn in June due to “material developments in global and Australian energy markets.”

It revealed that challenges with coal delivery to Eraring Power Station were expected to persist and result in a material increase in coal purchasing costs.

The good news is that trading conditions have improved meaningfully since June. And while it isn’t enough for its previous guidance to be reinstated in full, the top end of its new guidance range is within the old range.

Management expects energy markets underlying EBITDA to be $500 million to $650 million in FY 2023. This will be up 37% to 78% on FY 2022’s segment earnings.

This has been driven by an expected increase in natural gas gross profit, which is offsetting suppressed electricity gross profit due to higher energy costs only being partially priced into regulated tariffs.

Origin also advised that it has contracted 4.4 million tonnes of coal of a targeted 5 to 6 million tonnes and expects to reach its target by the end of the 2022 calendar year.

FY 2024 guidance

Also giving the Origin share price a lift is management’s commentary on FY 2024.

Although it hasn’t provided any concrete guidance, it advised that it “anticipates further growth in Energy Markets Underlying EBITDA.”

A higher contribution is expected from the electricity business as higher wholesale electricity prices flow through to customer tariffs. Though, it warned that electricity earnings are subject to coal contracting outcomes.

It also advised that the implementation of Kraken Origin is expected to deliver on the targeted $200 million to $250 million cash cost savings from an FY 2018 baseline.

The post Origin share price higher on earnings guidance update appeared first on The Motley Fool Australia.

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Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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