By Jenny Ruth
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Monday 31st August 2009 |
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Lines company Vector's result appeared to be strong but was boosted by one-off gains and signals challenging times ahead, says Forsyth Barr analyst Andrew Harvey-Green.
Vector reported a $34.4 million rise to $582.2 million in earnings before interest, tax, depreciation and amortisation EBITDA.
"However, included in these figures were one-off gains from the reversal of a contractual indemnity provision ($8.9 million) and revenue from services provided to the new Wellington electricity network owners (estimated at $5 million). These one-off gains have taken some of the gloss off an otherwise very good result," Harvey-Green says.
He says second-half gas wholesaling EBITDA of $25.3 million was down more than 50% on both the previous second half and the first half. "Economic conditions, strong competition and the higher use of imported LPG all combined to reduce both gas volumes and gas margins."
Harvey-Green has cut his forecast of Vector's EBITDA for the year ending June 2010 by 2.8% to $584.8 million.
"Whilst we like Vector's defensive attributes, we believe Vector will find it difficult to grow earnings from 2009 levels," he says.
"The gas wholesaling business is facing significant challenges to maintain margins and volumes and the electricity and gas network divisions face regulatory price cuts."
BROKER CALL: Forsyth Barr rate Vector (VCT) as hold.
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