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Date : 15/09/2021

AGL Shares Sunk On ASX Despite New Gas Sale Agreement

AGL Energy was once among the top dividend stocks on the ASX. It is now arguably one of the most damaged large-cap stocks on the ASX. AGL retails electricity to wholesale markets and customer markets. Wholesale electricity prices are plunging, and renewables are surging.

The debate around climate change is intensifying in the political, corporate and investor circles. Many investors have been aligning their portfolios by divesting from commodities that are harmful to the environment solely from an ethical standpoint. Thus, this entire sector is now suffering from a fundamental and cultural shift.

Why is the AGL Shares Price falling on ASX since reporting its FY21 Results?

The AGL share price keeps going from bad to worse. Indeed, year-to-date, AGL declined by 51% from $11.96 to $5.85 per share at the closing on Wednesday. At the end of the day, AGL finished at a scandalous twenty-year low.

This attests to pretty negative sentiment from investors, given there are no recent headlines and announcements.

On a positive note, the electricity provider share price had a brief respite on Tuesday after the release of a new sales agreement with Cooper Energy (ASX: COE). Furthermore, despite a never-ending share price decline, AGL’s dividend yield had increased to near 12%. However, it might be the only good news that we have for the company.

Hence, FY21 results were pretty dull:

  • Revenue decreased 10.0% on the prior corresponding period (PCP) to $10.9 billion.
  • Underlying profits fell 33.5% to $537 million on the PCP.
  • Underlying earnings per share (EPS) dropped 31.6% to 86.2 cents.
  • Net operating cash outflow before significant items was $870 million – a 35% drop.

According to the company, FY21 was a challenging year for AGL. In fact, the poor performance was due to lower wholesale electricity prices and reduced electricity generation output at the peak period. Moreover, the roll-off of the legacy supply contract in wholesale gas contributed as well to the weak FY21 results.

After a difficult FY21, nonetheless, AGL remains optimistic for FY22. Thus, the wholesale electricity prices are expected to rebound. The company’s key commodities have improved. It is worth noting that AGL operates some of the lowest cost generations in the national electricity market.


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