HEI 1Q profit slumps 79%
The company's profit is 29 cents a share lower than estimates
Hawaiian Electric Industries Inc., said yesterday it missed analysts' first-quarter earnings estimates by 29 cents a share as net income plunged 79 percent.
The Honolulu-based power company owner and parent of American Savings Bank said the slump was caused in part by maintenance costs at its Hawaiian Electric Co. subsidiary and a write-off related to its Keahole power plant.
Net income for the utility fell 98 percent to $453,000 from $21 million a year earlier, and revenue fell 5.8 percent to $447.7 million from $475.1 million in the first quarter of 2006. American Savings Bank had a 31 percent drop in earnings to $11.6 million.
Overall, HEI had net income of $6.8 million, or 8 cents a diluted share, compared with $32.3 million, or 40 cents, a year earlier. Analysts had been expecting 37 cents a share.
Revenue fell 3.6 percent to $554 million.
Hawaiian Electric Industries Inc., citing increased maintenance expenses and a $6.9 million write-off related to a Big Island rate case, said yesterday it missed analysts' first-quarter earnings estimates by 29 cents as net income plunged 79 percent.
The Honolulu-based power company owner and parent of American Savings Bank said the slump was caused in part by maintenance costs associated with its Hawaiian Electric Co. subsidiary.
Net income for the utility dropped 98 percent to $453,000 from $21 million a year earlier, and revenue fell 5.8 percent to $447.7 million from $475.1 million in the first quarter of 2006. American Savings Bank had a 31 percent earnings drop, to $11.6 million.
Overall, HEI had net income of $6.8 million, or 8 cents a diluted share, compared with $32.3 million, or 40 cents, a year earlier. Revenue fell 3.6 percent to $554 million.
Four analysts surveyed by Zachs Investment Research had a consensus earnings estimate of 37 cents a share, ranging from 36 cents to 38 cents.
"Several challenges we experienced in 2006 persisted in the first quarter of 2007," Constance H. Lau, president and chief executive of HEI, said yesterday in a statement. "Higher quarter-over-quarter O&M expenses and the write-off of Keahole expansion project costs more than offset the impacts of slightly higher quarter-over-quarter kilowatt-hour sales."
Kilowatt-hour sales in the quarter rose to $2.4 million from $2.39 million because of load growth resulting from construction and an increase in customers.
Operating expenses for the utility dropped 3.4 percent to $427.3 million, and depreciation expense increased by $1.7 million to $34.3 million, because of new plant additions, including the Ford Island substation and a high-efficiency generating unit at Maui Electric Co.'s Maalaea power plant.
Operation and maintenance expenses for Hawaiian Electric Co. were up by $15.5 million from last year primarily due to $7.2 million in costs related to the overhaul of generating units and $1.2 million in higher substation maintenance.
"They are going to continue to suffer mightily as they continue to keep this utility operating, and they will suffer mightily until they can get some rate relief," said James Bellessa, a Great Falls, Mont.-based sell-side analyst with D.A. Davidson & Co. He had estimated earnings of 36 cents a share for the quarter.
The subsidiary also wrote off part of the costs associated with the Keahole plant expansion project on the Big Island in a settlement agreement with the state for Hawaii Electric Light Company's pending rate case.
An inverted-to-flat yield curve pressured net interest margin at American Savings Bank, while noninterest expenses remained high, Lau said.
"The combination of higher short-term and falling longer-term interest rates have made the interest rate environment significantly more challenging than it was during the first quarter of last year," Lau said.
Net interest income, which reflects the difference of what the bank pays depositors and what it brings in from loans, fell to $49.3 million from $52.7 million. Net interest margin narrowed to 3.07 percent from 3.29 percent last year.
Noninterest income, which includes revenue from service charges and fees, increased $1.2 million to $16 million. Noninterest expenses jumped $6.5 million to $46.9 million from a year earlier because of higher legal-related expenses and an increase in compensation and occupancy costs.