HEI credits economy for 27% profit rise
By Deborah Adamson
Advertiser Staff Writer
Hawaiian Electric Industries' profit rose 27 percent in the first quarter thanks to a strengthening Hawai'i economy and a blockbuster real-estate market.
"The most important factor is the strength of the Hawaiian economy. Kilowatt-hour sales are up. There is a high correlation between kilowatt sales and the strength of the economy," said Robert Clarke, HEI chairman, president and chief executive.
"The real-estate market has been very strong and home values have gone way up, so the credit quality of our bank has gone up dramatically," Clarke said.
In the quarter ended March 31, the Honolulu-based holding company for Hawaiian Electric Co. and American Savings Bank earned $30.9 million, or 80 cents per diluted share, compared with $24.3 million, or 66 cents, in the like period a year ago.
Wall Street analysts were expecting earnings per share of 74 cents in the March quarter.
Total revenue rose by 3 percent to $437.1 million, compared with $424.6 million last year.
Regarding the individual performances of its subsidiaries, the electric utility, HECO, saw kilowatt-hour sales rise by 4 percent, helped by an increase in visitor arrivals, lengths of stay and customer use. Revenue rose by 5.4 percent to $346.6 million.
Profits rose by 13 percent to $20 million, helped by a $1.6 million decline in retirement-benefit costs as the stock market improved and boosted assets.
HECO supplies power to more than 400,000 customers in Hawai'i, or 93 percent of the market.
American Savings Bank saw a revenue decline of 6 percent to $89.2 million in the quarter, as lower interest rates squeezed margins. But offsetting the decrease was a $1.6 million dip in its loan loss allowance as the quality of loans improved with a rising real-estate market. Profits rose 18 percent to $15.9 million.
Delinquent and nonaccrual loans — those for which American Savings Bank is no longer collecting interest because of the borrower's default — slipped to 0.5 percent of total loans as of the end of March. It's one of the lowest levels ever achieved in company history.
"As long as the economy stays strong, these trends could continue," Clarke said. "I think the economy is in good shape. There's more optimism in business leaders around town than I've seen in years."
HEI also noted that a revision in accounting rules could change which companies are consolidated into its financial statements in the future.
HEI is holding its annual shareholders meeting today. The event starts at 9:30 a.m. in Room 805 of the American Savings Bank Tower at 1001 Bishop St. in Honolulu.
Hawaiian Electric shares closed down 33 cents at $48.95 yesterday. The earnings were announced after the market's close.
Reach Deborah Adamson at dadamson@honoluluadvertiser.com or 525-8088.
