FRANKFURT (Reuters) – German energy group E.ON (DE:) on Wednesday posted a 75% drop in operating profit at its retail unit, as a price cap in Britain continues to squeeze margins of local utilities.

Second-quarter adjusted earnings before interest and tax (EBIT) declined to 21 million euros ($23.54 million) at the division. “The market in Great Britain is currently particularly challenging,” Chief Financial Officer Marc Spieker said.

E.ON is currently in the process of buying the retail and networks activities from rival Innogy (DE:) as part of an asset swap with peer RWE (DE:), a deal it expects to close in September.

The deal will raise E.ON’s exposure to the British retail market, where a price cap on tariffs has pushed large energy providers into loss. It has responded with cost cuts and will look at strategic options for Innogy’s British retail unit Npower.

On a group level, second-quarter adjusted EBIT fell 18% to 542 million euros, slightly higher than the 528 million Refinitiv estimate, as the steep retail decline was offset by moderate falls at E.ON’s network and renewables divisions.

The group confirmed its 2019 outlook, still expecting adjusted EBIT of 2.9 billion to 3.1 billion euros and adjusted net profit of 1.4 billion to 1.6 billion.

($1 = 0.8921 euros)

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