AGL shares slide after huge statutory loss overshadows underlying growth

AGL's FY 2023 results were a bit of a mixed bag.

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AGL Energy Limited (ASX: AGL) shares are having a volatile day.

In morning trade, the energy giant's shares were up almost 2% to $11.80 before giving back their gains.

At the time of writing, the AGL share price is trading 0.5% lower at $11.50.

A businesswoman exhales a deep sigh after receiving bad news, and gets on with it.

Image source: Getty Images

What's going on with AGL shares today?

Investors appear undecided on AGL's FY 2023 result release this morning.

And there's a good reason for this. On an underlying basis, the company delivered a stellar set of numbers across the board.

Revenue was up 7.1% to $14,157 million and underlying profit after tax jumped 24.9% to $281 million. The latter was at the very top end of its reasonably broad FY 2023 guidance range of $255 million to $285 million.

This strong earnings growth reflects higher wholesale electricity and gas pricing, as well as solid customer growth.

This allowed the AGL board to increase its full-year dividend by 19% to 31 cents per share, unfranked. Incidentally, this was in line with what analysts at Macquarie were expecting from the energy giant.

Big ticks for AGL there. However, on a statutory basis, things were very different.

Statutory loss overshadows underlying growth

For the 12 months, AGL posted a statutory loss after tax of $1,264 million.

This statutory result includes a loss of $655 million after tax treated as significant items and a loss of $890 million after tax from the changes in the fair value of financial instruments.

In respect to the significant items, they include AGL recording $680 million in impairment charges related to the targeted earlier closure dates of its thermal assets.

AGL's CFO, Gary Brown, explains:

The statutory loss of 1.264 billion included $(680) million of impairment charges due to the targeted earlier closure dates of thermal assets in line with our accelerated decarbonisation plan, as announced in September 2022; and a negative movement in the fair value of financial instruments of $(890) million – primarily reflecting the impact of a drop in forward prices for electricity on a net buy position.

Anything else?

Another point that could be weighing on AGL shares is its guidance for FY 2024.

Management has only maintained its guidance for the new financial year. Whereas it is quite likely that some investors were hoping for a little more colour on its expectations for the year ahead.

Particularly given how broad its guidance range is for FY 2024. Management has previously guided to underlying profit after tax between $580 million and $780 million. This represents a whopping 105% to 177% increase year on year.

But with a $200 million difference from top to bottom, it would have been nice to see this range narrowed.

The company also warned that it has "seen a warmer start to the financial year with milder than expected weather in July, which has contributed to reduced gas consumption and lower spot prices and volatility."

In addition, it notes cost pressures from the "impact of increased competition and higher revenue from pricing outcomes increasing variable costs such as net bad debt expense and channel and marketing spend."

This could have some investors feeling that the bottom end of the range is more likely for FY 2024.

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 positions in and has recommended Macquarie Group. The Motley Fool Australia has positions in and has recommended Macquarie Group. 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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