HEI income Hawaiian Electric Industries Inc., hampered by rising expenses, posted a 9.5 percent decrease in net income in the first quarter as its two subsidiaries turned in a mixed performance.
slips by 9.5%
Rising expenses hurt Hawaiian
Electric Industries in the quarterBy Dave Segal
dsegal@starbulletin.comOverall, the company had earnings of $24.3 million, or 66 cents a share, compared with $26.9 million, or 75 cents a share, a year ago. The results fell short of earnings estimates, whose average was either 78 cents or 79 cents depending on the investment research firm.
David Parker, an analyst at Robert W. Baird & Co. in Tampa, Fla., downgraded the stock today to "neutral" from "outperform" and lowered his price target to $43 from $44. The shares closed down 85 cents today to $40.01.
Meanwhile, the company's electric utility subsidiary, which provides service to 95 percent of the state, had a decline in net income of 13.3 percent to $17.7 million from $20.4 million in the first quarter of 2002.
HEI's banking subsidiary, American Savings Bank, recorded a 1.2 percent gain in net income to $13.5 million from $13.4 million a year earlier.
Total company revenues increased 12.5 percent to $424.6 million from $377.4 million while total expenses grew 16.9 percent to $365.5 million from $312.8 million.
HEI attributed some of its increased expenses to the negative performance of its retirement plan assets over the past three years. Earlier this year, HEI said in a Securities and Exchange Commission filing that its net retirement benefits expense would increase $16 million in 2003 over 2002. It mostly affected the utility subsidiary.
Robert Clarke, HEI chairman, president and chief executive officer, characterized the first-quarter performance as strong "considering the expected increases in retirement benefits costs and the impact of the uncertainties surrounding the war in Iraq on the Hawaii economy."
Electric utility revenues jumped 18.2 percent to $328.9 million from $278.3 million, but expenses, including retirement benefits and depreciation, rose 23.7 percent to $287.9 million from $232.7 million. Kilowatthour sales grew 2.5 percent.
Clarke said the state's strong real estate market boosted kilowatthour sales as residential usage and the number of residential customers increased.
"The full impact of the conflict with Iraq on the Hawaii tourism industry and the company's kilowatthour sales growth is still unknown," Clarke said.
American Savings Bank's increase in net income was attributed to a lower provision for loan losses and slightly higher net interest and other income. However, the increase was partially offset by writedowns of mortgage servicing rights and higher expenses stemming from the bank's transition from a retail thrift to a full-service community bank. Bank revenues fell 3.8 percent to $95.1 million from $98.8 million and expenses dropped 5.2 percent to $72.7 million.
Clarke said the bank's loan asset quality and delinquencies improved in the first quarter and resulted in a lower provision for loan losses. The provision for loan losses was $1.2 million at the end of the quarter compared with $3.5 million a year earlier.
The low interest rate environment continued to put pressure on the interest rate spread, according to Clarke. American Savings Bank's net interest margin, which is the difference between what it earns on loans and investments and the interest it pays on deposits, was 3.14 percent compared with 3.27 percent a year ago.