Sempra Profit Up as Sales Climb 9%

Sempra Energy, the San Diego-based parent of two major Southern California utilities, said Thursday that its second-quarter profit rose 4% from a year earlier on the strength of higher natural-gas and electricity sales.

But the earnings fell short of Wall Street’s forecasts, and Sempra’s stock dropped 46 cents, or 1.3%, to $36 a share on the New York Stock Exchange. Still, the stock is up 22% so far this year.

In June, Sempra -- which owns Southern California Gas Co., the nation’s biggest natural-gas utility, and San Diego Gas & Electric -- raised its earnings guidance for the full year to between $680 million and $730 million, or $2.90 to $3.10 a share.

The second-quarter results “were consistent” with that revised outlook, Sempra Chief Executive Stephen Baum told analysts on a conference call.

Some analysts weren’t so sure. Sam Brothwell of Merrill Lynch & Co. said that “to make that range, the second half of 2004 will have to be strong.” Sempra’s second-quarter results were “a bit worse than our expectations,” he wrote in a note to clients.

In the three months that ended June 30, Sempra’s net income climbed to $121 million, or 52 cents a share, from $116 million, or 55 cents, a year earlier. The per-share profit fell because Sempra had more shares outstanding this year than last.

Wall Street analysts on average had expected Sempra to earn 65 cents a share, according to Thomson First Call.

Sempra’s revenue increased 9% to $2 billion from $1.84 billion from a year earlier.

Earnings at San Diego Gas & Electric, which has 1.3 million electricity customers and 775,000 natural-gas customers, fell 27% to $30 million from $41 million.

The drop mainly reflected the end of cash incentives that the California Public Utilities Commission had provided to the San Onofre nuclear plant south of San Clemente, a plant in which Sempra owns a 20% stake. The incentives, intended to encourage more efficient operation of the plant, expired last year, the company said.

Southern California Gas’ profit jumped 35% to $50 million from $37 million, because of higher sales, Sempra said. The utility has 5.4 million home and business customers.

Profit at Sempra Energy Resources, its wholesale power division, also more than quadrupled to $22 million from $5 million, as new generators came on line.

While acknowledging the sharp gain, some analysts noted that Sempra Energy Resources made more money -- $37 million -- in this year’s first quarter. Southern California Gas and Sempra Energy Trading, which trades electricity, oil and other commodities, also had higher first-quarter earnings compared with the second quarter.

Sempra executives said that wasn’t unusual because of the seasonality of its business. Its wholesale-power division, for instance, typically signs contracts that call for lighter volume in the second quarter compared with other times of the year, they said.

Sempra’s second-quarter results included $8 million in losses from discontinued operations, including a British energy marketing firm, Atlantic Electric & Gas, that was sold in April.