LONDON (Reuters) - Britain’s largest energy supplier, Centrica (CNA.L), warned that warm weather and weaker commodity prices in the first quarter had hurt its margins at its energy supply business but it stopped short of revising any annual financial targets.
The utility, which owns household energy supplier British Gas, also used a first-quarter trading statement and annual general meeting (AGM) on Monday to fire off another warning shot against any government moves to cap energy tariffs.
Theresa May’s ruling Conservative Party, which is widely expected to be re-elected in a snap general election next month, has pledged to introduce a cap on energy prices in a bid to ease voter discontent about rising household bills.
“We fundamentally don’t believe that price regulation is good for consumers,” Centrica Chief Executive Iain Conn said at the company’s AGM in London.
He said that any impact from a price cap was more likely to be seen in 2018, but that little information was available to assess its consequences.
“It’s wrong to suggest supply companies have caused bills to rise,” he added, saying transmission and government policy costs were to blame instead.
Analysts said these political risks continued to weigh on Centrica’s share price, which fell about 5 percent when the Conservative Party announced its policy two weeks ago.
“Today’s trading update reads as a small incremental negative and ... we would continue to avoid the name until there is better visibility on the competitive retail environment in the UK,” said analysts at RBC Capital Markets.
Centrica’s shares initially fell after its trading statement but were up 2.2 percent at 1511 GMT, helped by a wider rise in UK equities.
Centrica said it had lost 261,000 customers since the start of the year. Most of those losses were associated with a large block of customers switching suppliers, a spokeswoman said.
Britain’s biggest utilities have been facing severe pressure from smaller suppliers entering the market and snapping up customers by offering cheaper tariffs.
Centrica said warmer weather than usual in Britain and North America had weighed on consumer energy demand in its two main markets, mainly hurting gross profit margins at its UK business.
Lower prices for oil and British gas and power since its last financial update in February also had a negative impact, Centrica said, as they make its power plants less profitable and reduce returns from the sale of its North Sea oil and gas.
Nevertheless, the company maintained its main financial targets for the year, including reducing debt to 2.5 billion pounds to 3 billion pounds, a level at which its CEO said the company would consider raising its dividend.
Centrica cut its dividend two years ago and again last year as earnings were hit hard by weak energy prices.
Editing by David Clarke and Susan Fenton