US woes knock profits at International Power
Saturday 06 November 2004
International Power's quarterly profit halved, the company announced, as trading conditions in the US remained tough. It said it expected no short-term recovery in the US.
The group's North American business recorded a loss of £1m for the third quarter, compared with a profit of £13m last year. The American performance meant that group pre-tax profits, for the three months to 30 September, dropped to £22m, from £45m last time. The US accounts for 25 per cent of turnover.
"From an operating point of view, the only reason we're down is because the US is down year on year.... This is the reason why we have a portfolio approach," Philip Cox, the chief executive, said.
The company said its businesses in Europe and Australia performed well. It also said that the US result was expected and was due to low spreads - the difference between the price of fuel needed for generation and the price of the electricity produced - in Texas and New England. "We continue to anticipate recovery in both New England and Texas in the period 2007 to 2009," the company said.
International Power shares closed down 1.75p at 155.5p. The company stressed that it expected to meet the City's full-year earnings forecasts, "at the upper end of the range of 5.9p to 7.6p [a share]".
Mr Cox said he still wants to expand in the US and wants to diversify the company's fuel base, as International Power's seven US stations are all gas-fired. To reduce dependency on this region, the company in July struck a $2.2bn (£1.2bn) deal to buy 13 power generation plants. It funded the deal partly with a £291m rights issue.
Michael Gifford, a fund manager at F&C Asset Management, said: "It looked like a disappointing set of results, but investors would do well not to be too bearish on the stock as electricity and energy prices continue to rise."
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