Financial Analysis Report: Origin Energy Finance Limited (OEFL) – Financial Year Ending 30 June 2024
Business Description
Origin Energy Finance Limited (OEFL) operates primarily as a financing entity for its parent, Origin Energy Limited. The company raises funds through various markets, including the Euro, Australian, and US markets, to provide financial support to its parent company. The core function is to facilitate long-term capital arrangements with activities limited to loan and interest management.
Industry Position and Competitors
As a financing subsidiary, OEFL is not directly engaged in the energy industry but supports its parent, Origin Energy Limited, in securing and managing funds. OEFL’s financial position depends heavily on the operational and credit standing of Origin Energy, which holds a solid investment-grade rating.
Key Revenue Streams and Customer Base
- Revenue: Primarily derived from interest on loans issued to its parent entity, with a minor gain from foreign exchange transactions.
- Customer: Solely Origin Energy Limited, reflecting a high dependency on one entity.
- Supply Chain: Minimal impact on supply chain as OEFL functions purely as a financing entity.
- Competitive Advantage: The company’s advantage lies in its ability to access diverse funding sources and pass favorable financial terms to its parent company.
Financial Statement Analysis
1. Income Statement
- Revenue: OEFL reported an interest income of $62.95 million, down from $71.44 million in 2023, representing an approximate 12% decline, driven by reduced loan activity.
- Net Profit: The net profit after tax stands at $524,000, significantly lower than the previous year’s $2.09 million, marking a decline of nearly 75%. This suggests diminished operational profitability.
- Expenses: Interest expenses fell in line with reduced income, from $68.29 million to $62.35 million.
2. Balance Sheet
- Assets: Total assets were reported at $2.10 billion, a decline from $2.24 billion in 2023, primarily due to a reduction in receivables from the parent entity.
- Liabilities: Liabilities stand at $2.08 billion, also lower than the previous year’s $2.23 billion, largely due to repayment of some USD-denominated capital market borrowings.
- Equity: Net assets showed a marginal increase from $19.67 million to $20.19 million, reflecting minimal retained earnings growth.
3. Cash Flow Statement
- Operating Cash Flow: Net cash from operating activities was $126.59 million, down from $243.64 million in 2023, signaling a decline in loan repayments from the parent.
- Financing Activities: OEFL used $126.67 million in financing activities, primarily repaying USD-denominated loans.
Dividend and Investor Information
- Dividends: No dividend was declared or paid for FY 2024, consistent with the previous year.
- Special Actions: OEFL issued AUD 500 million in Medium Term Notes post-reporting date, maturing in 2031, and extended it to Origin Energy Limited, providing potential long-term support for liquidity.
Key Findings for Investment Decision
Strengths
- Stable Parent Credit Rating: Origin Energy’s investment-grade credit rating supports OEFL’s low credit risk.
- Strong Capital Access: OEFL’s successful issuance of AUD 500 million in Medium Term Notes shows robust capital market access.
Risks
- Profit Decline: Significant reduction in net profit (75%) raises concerns over sustainable profitability.
- Single-Customer Dependency: Sole reliance on Origin Energy Limited for revenue increases operational risk.
Recommendations
- For Current Investors: Hold – While profitability has declined, the stable parent credit rating and recent issuance of new notes provide reassurance about OEFL’s capital stability.
- For New Investors: Avoid – Given the profit decline and the high dependency on a single customer, potential investors should wait for improved financial results or diversification of revenue sources.
Disclaimer
This recommendation is based solely on the financial data within the report for FY 2024. Investors should conduct additional research and consider market trends, company announcements, and their own financial goals before making investment decisions.
