--Results in Brazil help offset declines in Spain

--One-off items also help boost result

--Sales of assets coming

(Adds comments from chairman, analysts and other details throughout.)

By Ilan Brat and Jean Guerrero

MADRID--Strong international operations helped boost Iberdrola SA's (IBE.MC) first-half net profit 15.2%, offsetting weak performance in its home market where economic turmoil has worsened.

Iberdrola posted a net profit of 1.8 billion euros, above analysts' expectations and compared with 1.56 billion euros in the first half of 2011. An average of estimates in a Factset poll of 10 analysts forecast first half net income of 1.5 billion euros.

The results come after Iberdrola earlier this year damped down profit expectations for 2012, saying it will be just below, or at the low end, of its previous 2010 to 2012 compound annual growth target of 5% to 9%.

"It has been a year marked by much uncertainty," said Iberdrola Chairman Ignacio Sanchez Galan in a conference call with investors.

Spain, which continues to suffer from the effects of a decade-long housing bubble collapse, was a particular weak spot. Electricity production and distribution in the country fell 17.8% and 1.3%, respectively, while it increased 1.2% and 34.3% in Latin America. Total sales rose 9.3% to 16.99 billion euros.

Renewable energy demand, however, was particularly strong in Spain, with production rising 23% thanks to improved wind conditions.

As a souring economic outlook in Europe weighs on the company's earnings, Iberdrola executives have said they will focus more on cost controls. In that vein, earnings before interest, taxes, depreciation and amortization--the key performance metric commonly known as Ebitda--increased 2% to EUR4.09 billion for the group.

The euro zone's sovereign-debt crisis, which has made borrowing costs soar, loomed on the mind of Iberdrola executive, although Mr. Sanchez Galan said the company has enough liquidity to cover its needs for the next two years. Iberdrola will decrease spending and continue to work on lowering its debt, which may include selling unnecessary assets, something the chairman expects will be "relatively easy."

He added that international operations will continue to mark future growth, and that any upcoming investments would be in countries "with stable and objective regulations" that have been well-defined.

Analysts said the strong headline result was due largely to positive one-offs, including the deductibility of the goodwill of Brazilian branch Elektro Electricidade e Servicio SA and court rulings in the U.S.

"Underlying trends are fully in line with expectations," J.P. Morgan said in a research note.

For a few years, Iberdrola has had its eyes set on growing in Latin America, particularly in Brazil, where the company has been trying to accumulate a majority stake in utility Neoenergia SA (GNAN3.BR). Iberdrola executives have said they hope to combine that company with Electro, the Brazilian utility the Spanish group bought in 2010. But the effort has stalled lately.

In the regulated business that includes electricity transportation and other services to the electrical system in Brazil, Ebitda rose 36.1%, offsetting a 12.6% drop in a similar business in Spain.

The liberalized business that includes contracts negotiated directly with end customers was also particularly weak in Spain, with Ebitda there declining 10.3% in the quarter. International operations account for more than half of the group's total Ebitda.

The chairman added that the company is still awaiting a package of energy reforms in Spain. A reduction in government-guaranteed remuneration for distribution services has hurt the company's domestic business.

He insisted that the high monetary cost of effectively subsidizing renewable-energy technologies has become unsustainable.

"This is absolutely aberrant. I'm sure those governing will do the logical and rational thing," he said.

At 1030 GMT, Iberdrola's shares were up 1.69% at 2.71 euros, valuing the company at 16.2 billion euros. This was in line with Madrid's Ibex-35, which was up 1.68%.

Write to Ilan Brat and Jean Guerrero at ilan.brat@wsj.com and jean.guerrero@dowjones.com

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