Belco chief warns of profit dip
Electric light company Belco last week predicted that net earnings could be off by some five percent for 2003, after it was hit by heavy costs from Hurricane Fabian damage.
In a letter to shareholders last week, president and CEO Garry Madeiros said the company was bracing itself for a profit dip, compared to its 2002 results, after the company incurred significant damage to its system after Fabian, the devastating September 5 hurricane hit and knocked out most of the Island?s power lines.
He added that Belco?s earnings were expected to be adversely impacted by both the costs of repairing their storm-ravaged systems, as well as the subsequent loss of sales after a number of large hotels were forced to close for repairs after the storm.
Mr. Madeiros said: ?Unquestionably, 2003 is a year that will long be remembered for the challenges it presented to Bermuda, our economy and our group of companies, especially Belco.
?Expenses resulting from Hurricane Fabian, as well as subsequent loss of sales, have affected projected net earnings for the year. Fortunately, our overall strong performance in the months preceding the hurricane has softened the effect. Excluding the profit derived last year from the sale of Fibre.com, 2003 net earnings projections are anticipated to be approximately five percent below 2002.?
Strong sales in the eight months preceding Hurricane Fabian resulted in total kilowatt hour sales through November being up by more than three percent over the same period in 2002.
Through November, residential sales were 4.33 percent ahead of the previous year and demand customer sales were up 2.17 percent for the period, while commercial sales were 2.56 percent above the same period last year.
Looking at the impact of Hurricane Fabian on sales, Belco reported that demand customer sales had been impacted the greatest due to hotel closures resulting in declining monthly sales in September, October and November of 3.32 percent, 4.03 percent and 7.86 percent, respectively. Mr. Madeiros added: ?Due to the residential and commercial billing cycles, the effects of Hurricane Fabian were only realised with the October results. Residential sales during the month of October were 5.36 percent behind the same month in the previous year and commercial sales declined 7.51 percent. Both residential and commercial sales recovered in November.?
Meanwhile, Belco subsidiary Bermuda Gas performed well with Mr. Madeiros reporting that for the 11 months to November, 2003, overall sales increased 6.5 percent compared with 2002.
In addition, the service and parts department recorded the highest sales increase for the period at 12.5 percent. Gas operation sales were 7.2 percent ahead, and changes to the mix of appliance offerings resulted in a 2.3 percent increase in appliance sales through November compared with the same period last year. Separately, Belco announced that its energy services subsidiary Besco had been partly sold to New Venture Holdings.
New Venture ? the conglomerate company that owns Air Care, Mechanical Solutions, Holmes Williams & Purvey, the Elite Group and CCS ? reportedly bought up 49 percent of Besco?s shares, in the deal.
In a letter to shareholders issued last week, Mr. Madeiros revealed that the sale of part of its Besco holdings would allow for ?project partnerships? that should have a positive impact on Belco?s earning.
He added that the partial sale could boost Belco?s overall earnings power with the partnership enabling ?greater cross-customer selling and synergies that Besco could not realise as a separate entity.?
Mr. Madeiros stressed that Belco was still the majority holder of Besco, and that it would continue to operate ?under the auspices of the Belco Holdings Group?.
Mr. Madeiros concluded to shareholders: ?As we conclude 2003 and move into 2004, I am grateful for the successes we have managed to achieve in a rather turbulent year. The past has brought with it both challenges and experiences that have served to make us a stronger organisation going forward. I am very proud of the commitment and dedication of our management and staff, and appreciative of our customers? and the community?s support of our efforts.?
A 38.5 cent fourth quarter dividend was also announced.