Hawaiian Electric profit drops 36%
The company says it faced challenges from both of its subsidiaries
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Hawaiian Electric Industries Inc. said yesterday that earnings fell 36 percent in the second quarter due partly to rising costs associated with its utility and high short-term interest rates at subsidiary American Savings Bank.
The company's net income, which missed analysts' estimates by 10 cents, came in at $17.5 million, or 21 cents a share, compared $27.2 million, or 33 cents a share.
Revenue dropped to $600.8 million from $605 million.
The profit for Hawaiian Electric Co. dropped 38.4 percent while American Savings' net income fell 22.4 percent for the quarter.
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Hawaiian Electric Industries Inc. said yesterday it missed analysts' second-quarter earnings estimates by 10 cents a share as net income dropped 36 percent after it faced continued challenges in both its subsidiaries.
The power company owner and parent of American Savings Bank said the slump was caused in part by rising costs associated with its Hawaiian Electric Co. subsidiary and high short-term interest rates at the bank, the company said yesterday in a statement released after the market closed.
Overall, Honolulu-based HEI posted a net income of $17.5 million, or 21 cents a share for the three months ending June 30, compared with $27.2 million, or 33 cents a share, in the second quarter of 2006. Revenue dropped to $600.8 million from $605 million.
Four analysts surveyed by Zachs Investment Research had a consensus earnings estimate of 31 cents a share, with estimates ranging from 26 cents to 35 cents.
"Our utility continued to experience rising costs of operating its systems reliably, while at the bank, the impact of persistently high short-term interest rates on costing liabilities continued to compress net interest margin, and noninterest expenses were higher than in the second quarter of 2006," Constance Lau, HEI president and chief executive, said in the statement.
Profit for Hawaiian Electric dropped 38.4 percent to $10.7 million from $17.3 million in the quarter, as it faced a $13.2 million bump in operating and maintenance expenses, primarily from $5.9 million in costs related to generating unit overhauls. Increased costs from retirement benefits, vegetation management and substation maintenance also contributed to the slump in net income, HEI said.
Depreciation expense increased by $1.7 million to $34.3 million because of 2006 additions to plants in service.
Kilowatt-hour sales in the quarter rose 1.7 percent to $2.5 million because of new load growth and warmer weather, the company said.
Net income for American Savings Bank fell 22.4 percent to $12.6 million from $16.2 million in the quarter.
"Higher short-term interest rates made the interest rate environment more challenging than it was during the same quarter of last year," Lau said. "In addition, higher noninterest expenses impacted comparative quarter-over-quarter bank results."
Net interest income, which reflects the difference of what the bank pays depositors and what it brings in from loans, fell 3.4 percent to $51.1 million from $52.9 million. Net interest margin narrowed to 3.20 percent from 3.30 percent last year.
Noninterest income, which includes revenue from service charges and fees, increased $2.6 million to $17 million. Noninterest expenses jumped $6.1 million to $47.2 million, which includes $3.8 million to improve the bank's risk management and compliance infras- tructure.
The bank provided $1.2 million for loan losses in the quarter, compared with none the year earlier, attributable to one commercial borrower, Lau said.
The company will hold a Webcast to discuss second-quarter results at 7 a.m. today on its Web site, www.hei.com. It will be available for replay two hours after the Webcast ends.