AGL Energy reported a 42% drop in statutory profit for the half-year ended December 2025, despite a modest revenue decline and growth in customer services. The company declared a higher interim dividend, underscoring confidence amid operational challenges and a strategic pivot to renewables.
- Revenue down 0.9% to $7.044 billion
- Statutory profit after tax falls 42% to $94 million
- Underlying profit after tax decreases 6.4% to $353 million
- Interim dividend increased to 24 cents per share, fully franked
- Net debt rises to $3.249 billion with gearing at 38.5%, remains compliant
Financial Overview
AGL Energy Limited has released its half-year financial results for the period ending 31 December 2025, revealing a challenging operating environment. Revenue dipped slightly by 0.9% to $7.044 billion, while statutory profit after tax plunged 42% to $94 million. Underlying profit after tax, which excludes significant items and fair value adjustments, declined by 6.4% to $353 million. Despite these headwinds, the company declared a fully franked interim dividend of 24 cents per share, up from 23 cents previously, signaling management’s confidence in the business’s cash flow and future prospects.
Operational Highlights and Customer Growth
AGL’s customer base expanded notably, with total services increasing by 2.4% to 4.668 million. Growth was driven by acquisitions, including Ampol Energy’s consumer base, and organic increases in electricity, gas, telecommunications, and Netflix services. Consumer electricity services rose by 49,000, particularly in New South Wales and Queensland, while telecommunications services grew by 7%, reflecting AGL’s diversification beyond traditional energy markets.
Wholesale electricity prices were generally lower across all states compared to the prior year, influenced by improved supply conditions and renewable energy output. This contributed to a 2.8% decrease in generation volumes, as AGL shifted its portfolio towards renewables and reduced coal-fired generation. Notably, the Rye Park Wind Farm commenced operations, boosting wind generation in New South Wales.
Costs, Capital Expenditure, and Debt Position
Operating costs fell by 3%, aided by productivity initiatives and the divestment of the Surat Gas Project. However, depreciation and amortisation rose by 3%, reflecting increased investment in thermal power stations and renewable assets. Capital expenditure totalled $652 million, slightly down from the prior period, with sustaining capital rising due to major outages and emissions reduction work, while growth capital declined as the Liddell Battery project nears completion.
Net debt increased to $3.249 billion, up from $2.82 billion at June 2025, driven by acquisitions such as the South Australia Virtual Power Plant (SA VPP) and ongoing investments in battery storage and gas projects. The gearing ratio rose to 38.5% but remains within covenant limits. AGL maintained its Baa2 credit rating, supported by solid interest coverage and funds from operations metrics.
Accounting Restatements and Strategic Moves
AGL restated prior period financials due to a change in accounting treatment for certain renewable Power Purchase Agreements (PPAs), reclassifying some as leases and others as derivative financial instruments. This adjustment affected asset and liability balances but did not impact debt covenant compliance.
In a strategic move, AGL entered a binding agreement to sell certain telecommunications customer contracts and associated assets of Southern Phone Company Limited for $115 million, with payment expected in equity instruments of the purchaser, Aussie Broadband Limited Group. Completion is anticipated within 2026, subject to customary conditions.
Segment Performance and Outlook
The Customer Markets segment saw a 60% increase in underlying EBIT, driven by higher consumer electricity and gas margins and cost efficiencies. Integrated Energy’s underlying EBIT declined by nearly 9%, reflecting lower trading margins and higher depreciation. Investments contributed modestly to earnings, with Tilt Renewables classified as held for sale.
AGL’s portfolio review highlights a continued transition towards renewable energy and battery storage, alongside disciplined cost management and customer retention efforts. The company’s impairment testing showed no new charges, though sensitivity to electricity pool prices remains a risk factor.
Bottom Line?
AGL’s interim results underscore the balancing act between managing legacy assets and investing in a renewable future, with debt levels rising but dividend confidence intact.
Questions in the middle?
- How will AGL manage rising debt amid ongoing capital investments in renewables and storage?
- What impact will the sale of Southern Phone customer contracts have on AGL’s telecommunications strategy?
- How sensitive is AGL’s asset valuation to future electricity market price fluctuations and regulatory changes?