Meridian swings to $227m profit as hydrology normalises from HY25 trough

What changed

Meridian swung from an HY25 loss to a materially profitable HY26, but the swing is anchored to an unusually weak prior comparable (record-low inflows and a domestic gas shortage).

• Revenue fell 11.0% to $2b from $2.3b as wholesale dynamics normalised.
• EBITDAF rose 96.9% to $506.0m from $257.0m, supported by record wind generation, second-best lake inflows on record and 12% growth in retail sales volumes.
• PBT moved to $317.0m from -$168.0m; NPAT moved to $227.0m from -$121.0m.
• Operating cash flow jumped to $336.0m from $50.0m, and capex fell to $71.0m from $104.0m, implying pre-lease free cash flow of about $265.0m versus -$54.0m.
• Gross borrowings rose to $1.9b from $1.7b, but cash rose to $183.0m and implied net debt/EBITDAF strengthened to roughly 3.3x from 6.0x.
• The interim dividend was lifted 4.1% to 6.4 cps.

What matters

1. The earnings recovery is real but largely hydrology- and fuel-driven. Management explicitly cites record wind generation and second-best lake inflows, against an HY25 period they described as the toughest in memory. That makes the 96.9% EBITDAF jump a normalisation rather than a structural step-up.
2. Cash conversion improved sharply. OCF/EBITDAF rose to 66.4% from 19.5%, and pre-lease FCF of $265.0m comfortably covers the interim dividend (payout vs pre-lease FCF of 63.8%). The dividend is funded from current-period cash, not balance-sheet capacity.
3. Leverage direction has inverted. Although gross borrowings grew by $209.0m, the EBITDAF recovery halved the net debt/EBITDAF ratio to roughly 3.3x. The underlying borrowing trajectory still warrants monitoring given the asset base expanded to $15.1bn.

Expectations

No quantitative guidance or forward-work disclosure was provided in the extracted materials. On the seasonal shape, HY25 represented only 42.1% of FY25 EBITDAF and an implied -$331.0m NPAT second half, so the historical pattern is second-half weighted for this group — but that pattern is distorted by the FY25 crisis. Annualising HY26 gives revenue of roughly $4b, below the FY25 $4.8b run-rate, meaning a stronger second half would be needed to match last year's revenue line despite much higher half-on-half profitability. The release does not support a confident read on FY26 earnings shape; it supports a read that Meridian has returned to margin after an extraordinary prior half.

Quality of result

The earnings recovery carries credible cash backing. PBT growth of 288.7% is close to NPAT growth of 287.6% — the effective tax rate normalised to 28.4% from a -28.0% benefit, so the headline is not tax-assisted. Trade debtors were essentially flat at $295.0m while revenue fell, pushing receivable days modestly higher to 26.8, but this is not a meaningful drag. Inventory and payable detail is not disclosed, so full operating working capital cannot be triangulated. The genuine quality caveat is exogenous: the EBITDAF uplift rests on hydrology and wind conditions that management identifies as record or near-record, and the hedge and demand response cost drag that crushed HY25 has substantially unwound. That is a favourable operating environment, not a cost-out or volume-mix story, and it is not guaranteed to repeat.

Unresolved

• The release references underlying net profit but the extracted materials do not reconcile statutory NPAT of $227.0m to any underlying figure, so the scale of non-recurring items inside HY26 is not quantified.
• The composition of the $209.0m increase in gross borrowings against a $72.0m cash build and $265.0m pre-lease FCF is not explained — capital deployment beyond maintenance capex is not visible here.
• Segment margin detail, customer concentration and forward hedge book disclosures are absent, limiting any read on how much of the retail volume gain (+12%) translates into sustainable margin.
• No FY26 EBITDAF target, retail target or generation guidance is disclosed.

This briefing cannot assess the durability of the hydrology and wind conditions underpinning the result, nor the earnings shape that would emerge under a return to average or adverse inflow conditions.

Key metrics

Analytical metrics

This analysis was generated using Annolyse, an AI-powered tool that analyses NZX company announcements. The analysis is based on available company filings and standard Annolyse calculations. This is general information only and does not constitute financial advice. The analysis may contain errors. Always read the original company filings and consult a licensed financial adviser before making investment decisions.