NGC signals full recovery with half year net profit

11.45am

NGC, on its knees as a result of the 2001 power crisis, today signalled its rehabilitation was complete when it posted a December half year net profit of $50.7 million.

That compared with a $35.37 million net profit in the year ago period.

The company, two thirds owned by Australian Gas Light Company Ltd, posted a fully imputed 8.5 cents per share (cps) dividend. The dividend a year ago was 4cps, unimputed.

Spiralling electricity prices and a lack of hedge contracts sent NGC spiralling to a $302 million loss in the year to June 2001 and caused it to quit electricity retailing.

The profit was on sharply lower revenue -- $249.3 million against $308.4 million a year ago -- due to assets sold in the wake of the 2001 loss.

The pretax operating profit lifted to $78.9 million from $58.4 million and earnings per share lifted to 7.1 cents from 4.6 cents.

"This is a pleasing outcome which reflects the continuing benefits of the business and capital restructuring programme commenced in 2002 and completed in 2003," chairman Greg Martin said.

He said the period-on-period results were not comparable due to the contribution to the 2002 half-year result of the-since-discontinued electricity generation and mass-market gas retailing activities.

NGC's debt position was also different. Before the December 4 capital restructure, NGC carried no debt, resulting in finance costs for the period of just $600,000, compared with $27.5 million in the 2002 half year.

This, and the absence of operating and depreciation costs associated with the divested businesses, more than offset the lost margin contribution from the divested businesses, Mr Martin said.

"Following NGC's strategic repositioning of the last two years, the company is now focused on its core businesses of energy infrastructure and metering, and its related businesses of gas and LPG trading."

Mr Martin said NGC had successfully completed a significant capital restructure in December comprising the three for seven share cancellation, the associated $524.7 million capital return to shareholders, and the $200 million bond issue.

At period-end, the company carried total debt of $437.9 million, made up of the $200 million fixed-interest bonds and $237.9 million of borrowings from its bank funding facilities.

After the share cancellation, shareholders' funds stood at $313.8 million, compared with $677.2 million a year earlier. The gearing ratio is now a "comfortable" 57.4 per cent.

Chief executive Phil James warned that gas supply uncertainties were likely to lead to more difficult trading conditions for natural gas sales and transportation, although the LPG market would remain buoyant.

He said revenues and margins were expected to be lower in the second half, with net earnings lower in the second half due to the very different capital and debt profile following the capital return.

The $51 million net profit was likely to be 70 per cent of the full year profit, Mr James said.

NGC continued to generate strong operating cash flows, amounting to $130.8 million, despite mixed trading conditions during the half-year.

"A difficult gas trading environment, reflecting uncertainties around the ongoing discussions on future Maui gas delivery profiles, contrasted with significant growth in an increasingly buoyant LPG market," Mr James said.

Total natural gas sales declined by 18 per cent to 32.8 petajoules (PJ), with lower volumes delivered across all consumer groups.

Gas sales for electricity generation declined by 45 per cent to 8.4 PJ and sales to petrochemical manufacturers were 8 per cent lower at 8 PJ.

The total LPG market, by contrast, increased by about 8 per cent to 155,000 tonnes. In line with this growth, LPG produced and sold by NGC through its On gas retail business increased by approximately 9.4 per cent to 22,807 tonnes, and LPG distributed domestically by NGC's subsidiary, Liquigas, increased by approximately 16 per cent to 52,867 tonnes.

NGC's Kapuni gas treatment plant had returned to full processing capacity. Arrangements for bringing Kahili gas on stream were being finalised.

NGC expanded its electricity meter asset base with the purchase of 1200 interval meters from d-Cypha in October and 6700 mass market and interval meters from TrustPower in August.

NGC reinforced LPG infrastructure and delivery capabilities, particularly through new reticulation in the South Island and the expansion of LPG storage capacity at Kapuni.

NGC shares rose 4c to $2.22 in early trading. They have risen from $1.58 a year earlier.

- NZPA