The Origin Energy Ltd (ASX: ORG) share price has remained relatively flat today, up 0.87% at the time of writing, following an announcement regarding non-cash charges. In FY20, the recognition of non-cash post-tax charges are expected to be between $1,160 million to $1,240 million.
Origin Energy is a leading Australian energy retailer supplying customers with electricity, gas, LPG and solar.
What caused the charges?
The key drivers of the charge have been attributed to revised commodity assumptions, economic impacts of the coronavirus pandemic, and the transition to lower carbon energy supply.
The estimates provided by Origin are subject to finalisation of its audited financial statements for FY20.
Because the estimates relate to non-cash charges, the charges will have no impact on Origin’s cash flow. The group confirmed it expects no change to its FY20 underlying earnings before interest tax depreciation guidance of $1.4–$1.5 billion.
Origin CEO Frank Calabria said:
Origin is well positioned over the long term with a business spanning energy retailing, power generation and natural gas which generates strong cash flow, along with exposure to future growth opportunities in renewable energy and new technologies.
FY21 update
On 6 April, Origin released an operational and financial update. In the update, it assessed a range of options to reduce expenditure and help offset the impact of COVID-19 and lower oil prices. The group confirmed it is targeting a 25–30% reduction in capex in FY21, compared to previous guidance of FY20 capex of $530–$580 million.
Financial position
On 31 December 2019, Origin Energy held liquidity of $3.8 billion. This consisted of $800 million in cash and $3 billion in omitted undrawn debt facilities. Its liquidity position is sufficient to meet upcoming debt of $1.2 billion maturing by December 2020 and $2 billion maturing in October 2021.
Origin’s net debt position was $5.6 billion as at 31 December 2019 and gearing was 29%.
Commenting on Origin’s position amid the pandemic, Frank Calabria said, “[w]hile there is some uncertainty about the extent of the short term impact on Energy Markets, Origin is in a resilient financial position with a sound balance sheet and competitive cost position.”
Revenue and profit was down 12% and 25%, respectively, when the group announced its half year report early this year in February.
The Origin share price is currently trading at $5.80 at the time of writing, which puts it up 0.87% today. Over the past year, the price has fallen 22.10%.
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Motley Fool contributor Matthew Donald has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. 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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