Vector forecast gets a nudge

Warmer-than-usual summer temperatures are being blamed for limiting Vector's earnings growth. Picture / Kenny Rodger

Full-year earnings could be as much as $9 million ahead thanks to cost savings, energy distribution group Vector forecast yesterday.

It now expects profits to rise from $40.8 million in the year to June 2005, to between $43 million and $47 million. This compares with forecasts in February of $38 million to $43 million.

The relatively flat profit forecast reflects warmer-than-usual temperatures during summer, usually the period of weakest demand, and higher interest and depreciation charges after its $1.3 billion acquisition of gas pipelines group NGC last year.

These same effects knocked the company into a quarterly loss of $5 million, down from an $8.2 million loss a year earlier.

In the nine months to March 31, operating profit fell from $41.74 million to $39.8 million, but sales rose from $581 million to $812.2 million.

Vector chairman Michael Stiassny said although warmer weather had lowered demand for electricity, profits had held up thanks to the efficiency drives.

Vector shares rose 2c to $2.67.

One analyst said: "It is a pretty so-so result."

Vector said the natural gas distribution business had been stable. Increased transmission to electricity generators operating gas-fired plants had increased. Meanwhile, LPG sales volumes exceeded the previous period.

The division's nine-month sales rose from $143.7 million to $416 million over the nine months, while operating profits rose from $42.5 million to $86.7 million. The rise reflects the contribution of NGC.

Profits at its technology services division, which operates Vector's meters business among other things, were slightly below forecast as upgrade plans hit the bottom line.

They rose from $4.1 million to $6.8 million in the nine months, while sales more than doubled from $21.5 million to $45.8 million.

The company played down a report in the National Business Review that it was planning a big investment in its telecommunications network. "No investment decisions have been made," a company spokeswoman said.

Vector listed on the sharemarket last August with a $600 million share issue - the largest local float in six years - representing 25 per cent of the company, majority-owned by the Auckland Energy Consumers Trust.

A sizeable majority went to shareholders in NGC. Then, in September, Vector took a knock from the Commerce Commission which prevailed on the company to pull back from a proposal to raise residential prices while cutting those for business. The month before, the commission told Vector and fellow distributor Powerco to reduce prices as they were making excessive profits.

- Additional reporting by agencies