Sempra Profit Up 58% on Tax, Utility Gains

Sempra Energy, which owns two major California utilities, said Tuesday that its fourth-quarter profit rose 58%, boosted by tax gains and higher income at its utility and trading units.

The parent of San Diego Gas & Electric Co. and Southern California Gas Co. posted net income of $234 million, or $1.03 a share, for the quarter ended Dec. 31, up from $148 million, or 72 cents, in the fourth quarter of 2002. Revenue rose 22% to about $2.1 billion.

San Diego-based Sempra’s results for the quarter included a favorable $118-million tax settlement, a $9-million gain on an accounting change and one-time charges totaling $53 million.

Excluding the one-time items, Sempra’s fourth-quarter profit was 70 cents a share. On that basis, the results beat the average analyst estimate of 57 cents, as tallied by Thomson First Call.

Tim Horan, an analyst at State Street Research, said the company outpaced estimates because of an unanticipated 11% surge in fourth-quarter profit at Sempra Energy Trading, a subsidiary that buys and sells commodities such as crude oil, electricity, natural gas and metals.

“Trading was a bright spot for them,” said Horan, whose firm has about 500 million Sempra shares among its $44 billion under management. “They did better than expected, especially in metals, where there have been a lot of price swings.”

The combined profit at San Diego Gas & Electric and Southern California Gas totaled $189 million in the fourth quarter, up 93% from the year-earlier period. The two companies are regulated and serve 7.5 million customers.

“I’m very pleased with our success,” Stephen Baum, Sempra’s chairman and chief executive, told analysts Tuesday. “Our results demonstrate that our strategy is working.”

Sempra delivered another bit of good news, raising the low end of its earnings forecast for 2004 by a dime. The company now expects 2004 profit of $2.70 to $2.90 a share -- above the most recent average analyst estimate of $2.69, according to Thomson First Call.

Baum told analysts that the change reflected new optimism about rate increases pending at the California Public Utilities Commission for both utilities. Rate settlements reached late last year “significantly strengthened our view as to the utilities’ earnings prospects for the next three or more years,” Baum said.

Other highlights for the year included a partnership agreement with Shell International Gas Ltd. to jointly build and operate Sempra’s planned liquefied natural gas terminal in Baja California.

Investors evidently were cheered by the results and the improved outlook for 2004. Sempra shares gained 47 cents to $31.38 on the New York Stock Exchange.

For all of 2003, Sempra reported net income of $649 million, or $3.03 a share, up from $591 million, or $2.87, in 2002. Stripping out special items, the 2003 profit totaled $2.93 a share versus $2.73 a year earlier. Revenue jumped by 30% to $7.9 billion.

Bloomberg News was used in compiling this report.