Iberdrola SA (IBE.MC), Spain's largest power-utility firm by market capitalization, said it its operations in the U.S. and Latin America drove its profits in the first three months of the year, as business in its home market continued to suffer due to a prolonged economic slump.

Iberdrola posted a net profit of EUR1.02 billion for the first quarter, a 0.7% increase from the same period in 2011 and broadly in line with analysts' projections of EUR1 billion.

The results come after Iberdrola earlier this year damped down profit expectations for 2012, saying that they will grow just below or at the low end of the targeted range of 5%-9% compound annual growth for 2010 to 2012.

"It has been one of the most difficult years in recent times," said Iberdrola Chairman Ignacio Sanchez Galan in a conference call with analysts. An economic downturn in Spain meant demand for energy contracted 0.9% in the reporting period, which has dragged the company's results.

Total energy production by Iberdrola in Spain fell 18.4% in the quarter from the year-earlier period, partly the result of a 63.4% plunge in output from water-powered operations resulting from "one of the driest winters" in recent memory, Galan said.

Earnings before interest, taxes, depreciation or amortization, or Ebitda--a key metric of operational performance--stood at EUR2.37 billion, also in line with a Factset poll which projected EUR2.33 billion. Ebitda in the same quarter last year was EUR2.27 billion. First quarter sales totaled EUR9.33 billion, from EUR8.48 billion in the same period last year.

Latin America and the U.S. "have compensated for the weakness of the business in Spain," Galan said. Production in the U.S. surged 29.2% while in Latin America output rose 7.7%.

Iberdrola has had for the last few years its eyes set on expanding in Latin America, in particular in Brazil, where the company has been trying to accumulate a majority stake in utility Neoenergia SA (GNAN3.BR).

Iberdrola hopes to combine that company with Elektro Eletricidade e Servicio SA (EKTR4.BR), the Brazilian utility it bought in 2010. The company's Ebitda in Brazil more than doubled in the quarter, mainly as the result of including Elektro in Iberdrola's results.

The company's deregulated business, which includes sales of electricity to households and industrial clients in Spain and the U.K., posted an 8.4% increase in sales in part driven by higher electricity prices in Spain. Ebitda for the deregulated business rose 2.7% to EUR828.3 million.

At 1144 GMT, Iberdrola's shares were up 1.32% at EUR3.46 while Madrid' IBEX-35 index was up 1.3%.

-By Ilan Brat and Darcy Crowe, Dow Jones Newswires; +(34) 91 395 8120; darcy.crowe@dowjones.com