E.ON highlights UK retail weakness as consolidation picks up

FRANKFURT (Reuters) - German energy group E.ON (EONGn.DE) said operating profit at its retail business fell by more than a third in the first nine months, singling out difficulties in Britain, where key peers announced plans to merge their struggling customer units.

Nine-month adjusted earnings before interest and tax (EBIT) at E.ON's customer solutions segment fell by 36 percent to 353 million euros (310.88 million pounds), slightly missing the 362 million average analyst forecast in a Reuters poll.

In Britain, where fierce competition and a looming cap on prices have eroded margins and caused established power retailers to bleed customers, adjusted EBIT fell 37 percent to 144 million euros for a profit margin of 2.8 percent.

"The intervention of the Competition and Markets Authority and rising costs for customer acquisition as part of our new marketing strategy will have a significant negative impact on earnings in the United Kingdom," the group said on Wednesday.

The remarks come a day after British utility SSE (SSE.L) and German rival Innogy (IGY.DE) said they were in talks about merging their UK retail energy businesses in a bid to gain scale and challenge British Gas as the country's largest supplier.

E.ON, currently in the process to sell its remaining stake in Uniper to Finland's Fortum (FORTUM.HE), said it is also hammering out a new growth strategy which it plans to present along with full-year results on March 14, 2018.

(Reporting by Christoph Steitz; Editing by Maria Sheahan)