HEI profit up 42%
By David Butts and Sean Hao
Advertiser Staff Writers
Hawaiian Electric Industries Inc. surprised investors and analysts with a 42 percent jump in fourth-quarter profit that propelled its share price to $49.17 yesterday, the highest in the history of the company.
Hawaiian Electric Industries — which provides electric power to most Hawai'i residents through its utility Hawaiian Electric Co. and owns the state's third-largest financial institution, American Savings Bank — said it earned $37.44 million, or 99 cents a share, in the three months to Dec. 31, versus income of $26.38 million, or 72 cents a share in the year-ago period.
Analysts had forecast earnings of 75 cents a share for the quarter.
"The fourth quarter was a nice surprise," said David Parker, an analyst with Robert Baird & Co. "Clearly the Hawai'i economy is on a roll."
Hawaiian Electric Industries' performance tends to reflect the state's economy, and investors see it as a vehicle for investing in growth of the state.
Hawaiian Electric Industries stock rose 52 cents to close at $49.17 yesterday, the first time it has ever closed above $49 a share. It neared that level in 2002, closing as high as $48.66 per share on Nov. 4, 2002, but then dropped back.
"We are happy about the year we had in 2003," said Robert Clarke, Hawaiian Electric Industries chairman, president and CEO, in a conference call with financial analysts. Clarke pointed to the estimated 2.9 percent growth in the state economy last year and expected 2.8 percent growth this year as positives for the company.
"Warmer weather and increases in usage and the number of residential customers contributed to kilowatt-hour sales growth of 2.4 percent in 2003," Clarke said.
Fourth quarter sales rose 4 percent to $454.22 million.
Net income at the utility and the bank were up 9.6 percent and 4.25 percent, respectively, but the biggest gain of the quarter came in the category of "holding and other companies." Hawaiian Electric Industries recorded a net income of $1.1 million in the category, compared with a net loss of $7.4 million in the same period a year ago.
At least part of that gain came from "lower interest costs, settlement of lawsuits and no investment write-downs." That included an unspecified gain from the settlement of a lawsuit with PaineWebber Inc. over the purchase of an investment for American Savings that later was found impermissible under bank rules.
"We believe that these (PaineWebber) settlements are non-recurring in nature," said James Bellessa, an analyst with D.A. Davidson & Co., in a written report.
For the year, HEI earnings fell 3 percent to $114.18 million, or $3.06 a share, versus $118.22 million, or $3.26 a share, in 2002. Full-year revenues rose 8 percent to $1.78 billion as higher electricity sales and the lawsuit settlement offset a drop in bank income because of lower interest rates.
Gains from increased electricity sales last year partially offset a $23.9 million increase in retirement benefit expenses and $3.1 million in charges relating to a settlement involving the company's expansion project at Keahole on the Big Island.
Retirement benefit expenses could be lower this year as a result of the recovery in financial markets, the company said. Returns on assets last year were 25 percent versus the company's expectation of 9 percent.
Reach David Butts at 535-2453 or dbutts@honoluluadvertiser.com and Sean Hao at shao@honoluluadvertiser.com or 525-8093.
