Energy giant RWE recently presented preliminary figures for the 2023 fiscal year that exceeded the company’s forecasts. In particular, the Water/Biomass/Gas segment and energy trading performed better than expected in the final quarter of 2023.

Before we take a detailed look at the numbers, I would like to introduce you to the business model: RWE is an internationally leading energy provider based in Essen. The company’s main focus is on electricity production, increasingly relying on renewable energy sources such as wind and solar.

Core activities also include energy storage, hydrogen business, trading of energy-related raw materials, and offering innovative energy solutions for industrial customers.

In November 2023, RWE management announced a significant increase in investments in the energy transition. The company plans to invest 55 billion euros in green technologies worldwide from 2024 to 2030.

Preliminary figures for 2023 at a Glance Now let’s take a look at the latest figures: Adjusted earnings before interest, taxes, and depreciation (adjusted EBITDA) reached around 8.38 billion euros in 2023, significantly exceeding the forecast range of 7.1 to 7.7 billion euros. This represents a 30% increase in profits compared to the previous year!

Adjusted operating profit (adjusted EBIT) was around 6.35 billion euros, also significantly above the forecast of 5.0 to 5.6 billion euros. Adjusted net income was previously forecasted in a range of 3.3 to 3.8 billion euros and ultimately reached just under 4.54 billion euros. All profit figures were significantly above expectations.

RWE share: Sell on good news? Despite the very strong numbers, RWE’s share price has dropped significantly in recent days. The motto here was: Sell on good news! Some investors fear that after these dream numbers, it can only get worse in the future.

Indeed, the comparison base is now extremely high. A decrease in sales and profits in the 2024 fiscal year would not be a disaster and is entirely normal given the recent sharp decline in energy prices on the European wholesale markets.

The fundamental valuation is still very cheap, and the „Green Energy“ business area should continue to grow in the future. Therefore, in my view, the recent price decline is more of a buying opportunity than a reason to worry.

Another argument for the RWE share is the dividend, which is expected to be 1 euro per share this year. This translates to a dividend yield of over 3% based on the current share price.