Sempra Energy Expansion Fuels 18% Rise in Profit

The parent of Southern California Gas Co. said Wednesday that fourth-quarter earnings rose 18% because its energy-trading business expanded and it acquired two utilities in South America last year.

Sempra Energy, which also owns San Diego Gas & Electric Co., also said it plans to cut its dividend by more than a third and buy back as much as 15% of its stock to finance new investments and boost its share price.

Net income rose to $105 million, or 44 cents a share, compared with profit from operations of $89 million, or 38 cents, a year earlier. Revenue rose 15% to $1.51 billion from $1.31 billion.

Sempra was expected to earn 42 cents a share, the average estimate of analysts polled by First Call/Thomson Financial.

Sempra shares rose $1.38 to close at $18.63 on the New York Stock Exchange. Its stock fell 32% last year.

The buyback and dividend cut will help Sempra make investments worldwide, bring its dividend in line with those of other utilities and meet its goal of increasing profit by an average of 8% to 10% a year for the next three years, Chairman and Chief Executive Richard Farman said.

“It’s good news because management thinks they can give investors a better return through expansion than paying dividends,” said Michael Heim, an A.G. Edwards analyst who has a “maintain position” rating on Sempra.

San Diego-based Sempra plans to reduce its quarterly dividend to 25 cents a share from 39 cents starting in the second quarter and buy back as many as 36 million common shares for $17.50 to $20 each, or as much as $720 million.

Carl Kirst, an analyst at Jefferies & Co., raised his rating on Sempra to “buy” from “hold.” He expects the stock price to reach $20.50 within a year.

For the year, Sempra’s Southern California utility profit fell 5% to $393 million, mostly because of a reduction in its regulated rate of return and higher interest rates.

Sempra’s non-utility businesses posted a profit for the first time, a year ahead of the company’s schedule. Those units, including its natural gas trading group and South American utility investments, contributed $15 million to net income last year, compared with a $34-million loss in the previous year.

At a Glance

* Align-Rite International Inc., a Burbank-based maker of photomasks, reported fiscal third-quarter profit of $526,000, or 11 cents per share, compared with $805,000, or 17 cents, a year ago. Revenue was $14.3 million, compared with $12.1 million a year ago.

In September, Align-Rite agreed to be acquired by Photronics Inc. of Jupiter, Fla., in a stock swap. Photronics later changed the terms of the deal after Align-Rite warned of lower third-quarter results. Analysts had estimated 18 cents to 19 cents. The deal is currently valued at about $114 million.

Photomasks are used by semiconductor makers to transfer circuit patterns onto computer chips.

* Callaway Golf Co., the top maker of golf clubs in the U.S., said that it broke even in the fourth quarter and that first-quarter earnings could be below forecasts because of the cost of introducing a new golf ball. Net income was $157,000, or less than 1 cent a share, contrasted with a loss of $64.7 million, or 93 cents, a year ago. Sales rose 1% to $115.7 million from $114.5 million.

Carlsbad, Calif.-based Callaway said the fourth quarter was helped by lower costs and higher U.S. sales of its Big Bertha clubs. It said first-quarter profit will be as much as 6 cents below year-ago earnings, when the company earned 18 cents. Analysts were expecting 27 cents. The company said there will be higher expenses in the first half of the year because of costs of introducing its new golf ball in February.

* NetZero Inc., a free Internet access provider based in Westlake Village, said its fiscal second-quarter loss widened to $24.6 million, or 27 cents a share, from a loss of $1.8 million, or 22 cents, a year ago as operating expenses, including stock-based compensation and amortization, increased. Analysts expected a slightly larger loss of 29 cents. Revenue climbed to $12.2 million from $122,000.