Why is the Origin (ASX:ORG) share price tanking today?

The Origin share price has fallen over 7% today following release of the company's revised outlook. Here are some announcement highlights.

| More on:

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

The Origin Energy Ltd (ASX: ORG) share price is down by 7.06% to $4.61 at the time of writing.

The downward spiral was set off by the release of Origin's revised operating conditions and guidance for FY2021.

Here's a few things we learned from the announcement.

Origin expects gross profits to be down

Origin expects FY2021 electricity gross profit to be down $250–290 million year-over-year. The previous guidance predicted a $170–220 million reduction.

The company puts this loss to lower wholesale prices, payment of a non-recoverable $40 million increase in network costs and the impact of mild summer conditions.

The natural gas gross profit is also expected to be down $200–250 million year-over-year. This has been raised from the original $100–150 million estimate.

Origin advised that the decline of the natural gas gross profit was influenced by lower sales and the roll off of legacy sales contracts that totalled $70 million.

The company believes that improved LPG and community energy services will partially offset electricity and gas gross profit losses.

Origin share price slides in tough operating environment

In addition to revised guidance, the company also commented on the current business environment.

Origin lists the influences of the coronavirus and weather patterns brought by La Niña as having had a material effect on the business.

The company expects the presently challenging operating conditions of energy markets to persist in FY2022.

Origin downgraded its underlying earnings (including electricity and gas) to the $1–1.14 billion range. Its initial guidance estimated between $1.15–1.3 billion.

Commenting on Origin's position, CEO Frank Calabria said:

Origin has two leading businesses with high quality assets and resources. We remain very focused on maximising value from the existing businesses and pursuing growth in customer value and low carbon solutions, which puts Origin in an ideal position to lead, and capture value, from the energy transition.

Regardless of the downgrades, Origin believes that its retail business is still on track to meet its $100 million FY2021 cost out target. The company stated that operations are performing well with strong cash flow generation.

The Origin share price has lost over 37% during the last 12 months.

Motley Fool contributor Gretchen Kennedy owns shares of Origin Energy Limited. 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 Bruce Jackson.

More on Share Market News

two computer geeks sit across from each other with their laptop computers touching as they look confused and confounded by what they are seeing on their screens.
Share Gainers

ASX tech shares outperformed US tech stocks by 2:1 in FY25. Here's why

Forget the Magnificent 7! Aussie tech shares had twice as much price growth as US tech stocks in FY25.

Read more »

Person pretends to types on laptop drawn in sand.
Opinions

I sold one of my oldest ASX 200 shares last week. Here's why

Why would I sell one of my longest-held stocks?

Read more »

Happy man working on his laptop.
Broker Notes

Leading brokers name 3 ASX shares to buy today

Here's why brokers believe that now could be the time to snap up these shares.

Read more »

Worker on a laptop at an oil and gas pipeline.
Energy Shares

Boss Energy shares have surged 93% since April. Here's what Macquarie expects now

Boss Energy shares remain a favourite for ASX short sellers. Are they in a for a payday or headed for…

Read more »

Bored man sitting at his desk with his laptop.
Share Fallers

Why Antipa Minerals, Northern Star, Pilbara Minerals, and Synlait Milk shares are falling today

These shares are starting the week in the red. But why?

Read more »

Three happy office workers cheer as they read about good financial news on a laptop.
Share Gainers

Why Bellevue Gold, Cobram, Hub24, and Nanosonics shares are pushing higher

These shares are starting the week on a positive note. But why?

Read more »

Three scientists wearing white coats and blue gloves dance together in a lab.
Share Market News

Is it too late to buy Pro Medicus shares?

Pro Medicus shares have risen 550% over 3 years. Have you missed the boat? Three experts weigh in.

Read more »

Broker analysing the share price.
Materials Shares

Buy, hold, or sell? Broker's verdict on 3 ASX 200 materials shares

Materials was one of four market sectors that weakened in overall value in FY25.

Read more »