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Feb 12 (Reuters) - Australia's top power producer AGL Energy (AGL.AX) , opens new tab posted a drop in half-year profit and narrowed its earnings forecast on Wednesday as cost-of-living concerns forced it to absorb higher electricity costs rather than pass them onto consumers.

Underlying profit fell 6.5% to A$373 million ($234.8 million) in the six months to December 31, 2024 but was still ahead of analyst expectations of A$307 million.

Statutory profit also dropped to A$97 million from A$576 million and earnings from consumers were down by one-quarter to A$102 million.

Chief executive Damien Nicks said earnings were "strong" and in line with expectations, narrowing guidance for full-year profit to between A$580 million and A$710 million, with a higher midpoint from A$530 million-A$730 million previously.

AGL is one of Australia’s main electricity retailers alongside Origin Energy and Energy Australia.

Known as the “Big 3”, they have faced accusations of exploiting their market power amid a cost-of-living crisis, with an inquiry by the Australian Council of Trade Unions finding last year they overcharged households.

AGL said the wholesale cost of electricity was higher across all Australian states, but it held back on passing on increases due to affordability concerns, causing margins from supplying energy to consumers to fall 16.7% to A$270 million.

“Assisting our customers with the ongoing cost-of-living pressures remains a key priority,” Nicks said.

AGL also faced margin compression as customers opted for lower-priced gas and electricity plans, the company said.

But its telecommunications business posted strong growth, with gross margins jumping 53.8% to A$20 million due to increased broadband and mobile customer numbers.

AGL said total operating costs were up 3.2%, driven by inflationary pressures and higher costs to keep its thermal power plants.

Increased investment in renewables, including the Firm Power and Terrain Solar business, also ate into profits.

Capital expenditure increased two-fold to A$667 million, with AGL ramping up investment in battery storage projects, including the ongoing construction of the Liddell Battery project.

The Sydney-headquartered firm, which counts tech billionaire Mike Cannon-Brookes as its top shareholder, declared an interim dividend of 23 Australian cents per share, below the 26 Australian cents declared last year.

Shares of AGL were up 2% in early trading off the back of the consensus-beating result, as the ASX swung between red and green territory.

($1 = 1.5896 Australian dollars)

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https://www.reuters.com/business/energy/australias-agl-posts-lower-profit-cost-of-living-concerns-curb-price-rises-2025-02-12/