GDF Suez Shares Decline amidst Lower Earnings Forecasts

GDF Suez SA (GSZ) has seen the biggest decline in last 4 years as it forecasts lower earnings for 2013 and also signs of weakness for the year after. Shares have actually plummeted by 16% (The biggest since October, 2008). In a statement released by the company, one of the biggest gas producers in France confirmed that the recurring net income for GSZ in 2013 will be somewhere between 3.1 billion Euros and 3.5 billion Euros, much less, if compared to that of the estimated profit of 3.7 billion Euro – 42 billion Euro. The profit is expected to be within the same range in 2014 as well. GSZ will continue to maintain the dividends, whereas, it has decided to cut investments.

The operational trend of GSZ has been described as very disappointing by JPMorgan Cazenove analysts. According to them, it is actually worse than what was predicted by the market. Currently, GSZ shares are priced at 15.175 Euro per share. According to other analysts, there is a demand crisis in Europe currently, mainly because of the boom that US gas production system has experienced and the slowing down of the economic growth. The company expects that its profit share in Europe will be cut down because of the economic crisis in this region. However, it is looking forward to double the sales of liquefied natural gas in the emerging markets.

Isabelle Kocher, the Chief Financial Officer of GSZ stated that European nations are currently facing significant power overcapacity and there are numerous policies being taken to boost usage of renewable energies. The demand for power and natural gas in Europe is currently down by 25% and 14% respectively, if compared to what it used to be in 2010. Isabelle however added that GSZ expects the situation to turnaround in 2015.

Gerard Mestrallet, the Chief Executive Officer said that he expects the company to rebound soon, but, refused to provide any sort of figures. Mestrallet added that GSZ will try to cut down the debt now by one-third (It had debts of 45.9 billion Euros by end of September, 2012) within end of 2014. GSZ also expects to cut short the spending by 20% within 2014. It is expected that the cost cuts will affect its loss contribution and gross profit by around 3.5 billion Euros in 2015.