Sempra Profit Up 38% on Trading Operation

Sempra Energy reported a 38% jump in fourth-quarter income because of strength in its trading operation, a business abandoned by many of the San Diego company’s competitors.

For the quarter ended Dec. 31, Sempra posted earnings of $148 million, or 72 cents a share, compared with $107 million, or 52 cents a share, in the same period of 2001.

Excluding a 7-cent gain on the purchase of Enron Corp.’s metals trading business, Sempra’s performance for the quarter exceeded Wall Street expectations of 53 cents a share, as measured by the consensus of analysts polled by Thomson First Call.

Fourth-quarter revenue rose to $1.7 billion from $1.3 billion in the year-ago quarter, boosted by increased wholesale trading revenue and higher commodity prices charged by Sempra’s utilities.

Sempra’s stock responded to the earnings news by jumping $1.01, or 4.3%, to $24.40 on the New York Stock Exchange.

Sempra, the parent of San Diego Gas & Electric Co. and Southern California Gas Co., spent much of last year buying assets that other trading companies were unloading, including CMS Energy Corp.’s natural gas trading book. After the December 2001 collapse of Enron, once the world’s largest energy trader, investors and lenders have steered clear of many companies in the trading sector.

Sempra has fared better because “a strong balance sheet and substantial liquidity help differentiate us from others,” Sempra Chairman and Chief Executive Steve Baum told analysts Thursday. “Our financial results demonstrate that our business strategy is working well.”

Baum said Sempra has delivered average annual earnings-per-share growth of 23% from 1998 through 2002 by using its regulated utilities as a strong financial foundation and squeezing earnings growth from its unregulated businesses, including energy trading, power-plant building and energy marketing to industrial and commercial customers.

For 2002, Sempra posted net income of $591 million, or $2.87 a share, up from $518 million, or $2.52 a share in 2001. The year’s income included a gain of 8 cents a share from the metals trading purchase.

Revenue for 2002 decreased to $6 billion from $7.7 billion because of lower commodity prices during much of the year.

Sempra Energy Trading benefited from fourth-quarter volatility and increased trading activity, with the unit’s net income jumping to $53 million from $10 million in the same quarter a year ago.

For 2002, the trading unit posted net income of $126 million, compared with $196 million in 2001.