PARIS Dec 3 GDF Suez was expected to
outline more cost cuts to cope with Europe's downturn, when the
French utility updates its outlook this week for what it has
said will be a difficult 2013.
GDF Suez's main challenge at Thursday's investor day will be
to demonstrate its ability to offset the impact of a glum
economic environment which is hurting the group's outlook in the
gas and electricity sectors, analysts said.
Europe's biggest utility, which cut 600 million euros ($780
million) costs this year, said at the end of October it could
carry out a major asset disposal by the year-end to protect its
"We estimate that GDF Suez has a controllable cost base of
about 20 billion euros," UBS analyst Per Lekander said in a
note. "This should allow it to step up the gross cost cutting
from 600 million euros per annum to 1.2 billion euros per annum
At this level, Lekander said, the plan could boost annual
core earnings by around 500 million euros.
GDF Suez will have to detail the new measures and quantify
the impact on net earnings to convince markets of the plan's
benefits, Morgan Stanley analyst Emmanuel Turpin said.
Analysts said GDF Suez may not be able to predict anything
better than stable EBITDA (earnings before interest, tax,
depreciation and amortisation) for 2013.
Last month, E.ON, Germany's No. 1 utility, cut
its 2013 outlook amid signs of weakening demand.
According to a Thomson Reuters I/B/E/S analyst poll, EBITDA
next year is expected at 17.5 billion euros against a GDF Suez
target of 17 billion.
"FIFTEEN YEARS AHEAD"
Analysts also said they hoped GDF Suez would forecast strong
enough cash flow up until 2015 to imply a stable or slightly
stronger dividend. The group was also expected to focus on
investment and asset sale plans.
GDF Suez has said its investment in 2013 and 2014 will
likely remain at the lower end of a 9-11 billion per year range.
The target was initially announced for the 2012-15 period
and GDF Suez said those levels should remain unchanged until the
economic situation in Europe recovered.
GDF Suez announced earlier this year the speeding up of its
asset disposal plan to finance the minority stake purchase of
An analyst, who declined to be named, said the company was
likely to announce a deal to buy Spanish group Repsol's
liquefied natural gas (LNG) assets. Wansquare reported last week
that GDF Suez was close to sealing a deal.
"This makes sense on a strategic level, but the market is
really looking at the group's debt right now," the analyst said.
Analysts say GDF Suez is healthier financially than European
rivals because it acted early to seize investment opportunities
in emerging markets.
"They are 15 years ahead of their competitors. Everyone is
now looking for new markets," the analyst said.
($1 = 0.7689 euro)
(Additional reporting and writing by Muriel Boselli; Editing by