Companhia Paranaense de Energia
), also known as COPEL, reported a 28.2% decline in its net
earnings in the second quarter of 2012. Net income in the quarter
came in at R$184.9 million (US$94.3 million). COPEL posted an EPS
of R$1.84 per share (US$94 cents per ADR) in the second quarter of
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Net operating revenues in the second quarter increased 10.3% year
over year to R$2,031.5 million (US$1,036.5 million).
Revenue improvement was witnessed across all the company's business
categories: Electricity sales to final customers grew about 4.5%;
sales to distributors surged 34.7%; use of main transmission grid
climbed 3.6%; telecommunications revenue increased 6.1%;
distribution of piped gas spiked 24.0%. Other operating revenues
shot up 97%. However, construction revenue dipped 9.5% year over
During the quarter, operating costs and expenses went up 18.1% year
over year to R$1,788.1 million (US$912.3 million), primarily due to
a rise in expenses in some categories including 40.3% in
electricity purchased for resale, 30.3% in expenses related to use
of main transmission grid, 21.5% in personnel and management, 24.3%
in pension and healthcare, and 52.6% in natural gas and supplies
for the gas business, among others.
However, higher costs in the above-mentioned categories were
partially offset by a 0.4% decline in material and supplies costs;
a 16.4% drop in raw material and supplies for electricity
generation; a 52.5% decrease in provisions and reversals and a 9.0%
fall in construction costs.
EBITDA declined 18.5% to R$378.3 million (US$193.0 million) with an
EBITDA margin of 18.6% versus 25.2% in the year-ago quarter.
Exiting the second quarter 2012, COPEL's cash and cash equivalents
plummeted 17.9% sequentially to R$673.7 (US$323.9 million) while
loans and financing inched up 0.4% to R$2,127.4 million (US$1,022.8
In the first half of 2012, COPEL generated R$437.7 million
(US$223.3 million) of net cash flow from operating activities,
while capital spending was R$442.2 million (US$225.6 million).
Companhia Paranaense de Energia is a fully integrated electric
utility of Brazil engaged in the generation, transmission and
distribution of electricity to the State of Paraná. The provincial
government of the State of Paraná controls about 58.6% of the
shares of COPEL. The company faces stiff competition from
Cia Energetica de Minas Gerais
We currently maintain a Neutral recommendation on the stock. Our
Neutral recommendation is supported by a Zacks #3 Rank, implying a
short-term Hold rating.