HEI reports fourth-quarter profits up by nearly 14%

By Frank Cho
Advertiser Staff Writer

Hawaiian Electric Industries Inc. yesterday said fourth-quarter profits rose nearly 14 percent, reflecting higher demand for electricity from a booming new-home construction market.

HEI, which owns the state's biggest electric utility company and its third-largest financial institution, reported net income for the three months that ended Dec. 31 of nearly $26.4 million, or 72 cents a share, from $23.2 million, or 67 cents in the same year-earlier period. Revenue rose 3.9 percent to $435.7 million from $419.3 million

On annual basis, HEI's income from continuing operations rose 9.7 percent to $118.2 million, or $3.26 cents a share, compared with $107.7 million, or $3.19, in 2001.

"Utility net income was up 2 percent, bank net income was up 16 percent and holding company net losses were down 3 percent in 2002 — a tremendous performance given the challenges of a Hawai'i economy recovering from the effects of Sept. 11," Robert Clarke, HEI's chairman, president and chief executive officer, said in a statement yesterday.

Clarke said the company benefited from a nearly 2 percent rise in electricity sales, largely from new-home construction, as well as increased bank fee income, lower provision for loan losses and improved net interest margins at its American Savings Bank subsidiary.

Though income from continuing operations posted a nearly double-digit growth last year, basic earnings per share rose just 2 percent mostly because of a 7 percent rise in the average number of shares outstanding compared to the previous year.

Income from electricity sales by HEI's Hawaiian Electric Co. Inc. subsidiary rose 2.2 percent last year, the company said.

"Increases in the number of residential customers caused kilowatt-hour sales to grow by 1.9 percent in 2002 despite cooler weather ...," Clarke said. Lower interest rates and improved operating efficiencies also helped grow utility income in 2002.

But some of those gains were partially offset by higher maintenance costs related to generating unit overhauls and a nearly $7 million drop in gross retirement benefits income.

At the bank, fourth-quarter net income fell more than 12 percent to $21.8 million, down from $24.9 million in the same quarter the previous year.

The company said falling interest rates squeezed net interest margins, and high levels of mortgage refinancing lowered asset yields during the quarter. But the savings bank was helped by roughly $1 million dollar gain during the quarter by an accounting rule change that called for the discontinuation of goodwill amortization. The change contributed $3.8 million to HEI's net income during 2002 and caused the company to restate its earnings for the previous three quarters.

The stock market was closed yesterday for Martin Luther King Jr. Day. The HEI stock last traded on Friday and closed at $43.93 a share, down 74 cents, but up nearly 10 percent from a year ago, according to Bloomberg News.