Marking the second time the company has reduced its earnings guidance in the last four months, NUI Corp. said Friday it anticipates fiscal 2002 earnings from continuing operations for the year that ended Sept. 30 to be between $0.85 to $0.95 per share, excluding the effect of the change in accounting, severance and discontinued items. In July, the company lowered its guidance to $1.50 to $1.60 per share from its previous guidance of $1.80 – $1.90 per share (see Daily GPI, July 17).

In addition, NUI said it also was reducing its fiscal 2003 earnings outlook due to higher pension expense and increased insurance costs, as well as expected continued weakness in the economy. The company said it was also moving its fiscal 2002 year-end earnings announcement to Dec. 9 due to a change in auditors and the adoption of new audit requirements.

“In July, we referred to the events that have affected fiscal 2002 as being equivalent to a ‘perfect storm,'” said John Kean Jr., NUI CEO. “In 2002, NUI has experienced (1) the warmest winter on record; (2) a weak economy; (3) meltdowns in the telecom and energy trading sectors; and (4) a deterioration in the equity markets. All these factors have continued to have a negative effect on our results. Looking forward, it is evident that the storm may not be over. As we close the chapter on fiscal 2002, we are continuing the actions we believe are necessary to deal with the uncertainties of the future. We are focusing on the fundamentals that will allow us to weather the storm and provide steady growth in shareholder value going forward.”

On news of the reduced guidance and the delay in reporting fiscal 2002 results, shares of NUI on the New York Stock Exchange were down $10.17, or 50% to trade at $10.05 in afternoon trading (1:45p.m. EDT).

“NUI has faced many challenges during its nearly 150-year history,” Kean added. “A key to its long-term success has been its ability to stay the course during times of turbulence. While current conditions have caused many other companies to abandon their strategies, we believe we have built a strong base within our businesses that will lead to long-term value creation.

“However, current times will require us to tighten our belts. We are reducing capital expenditures and operating expenses to improve cash flow. During the past nine months, we reduced debt by $120.2 million, or 20%, thereby improving our debt to equity ratio,” he said. “We are planning to further strengthen our balance sheet through the issuance of additional equity or equity-equivalent securities and through other operating cash flow improvements in fiscal 2003. Therefore, our view of the future gives us the confidence to commit to maintaining our annual dividend of $0.98 per share.”

The company added that its fourth quarter earnings took a hit because flat natural gas prices and lower price volatility resulted in NUI Energy customers continuing to purchase natural gas on a month-to-month basis as opposed to signing longer-term contracts, which is historically the case ramping up for the winter season. These factors resulted in lower-than-anticipated margins and reduced financial performance for NUI Energy in the fourth quarter and for the year.

The company said that while there are issues that “will clearly put downward pressure” on NUI’s fiscal 2003 financial performance, there are other factors that could mitigate these effects and cause the company’s outlook to improve. NUI pointed out that its Elizabethtown Gas Co. utility is currently awaiting word on a base rate increase it filed with the New Jersey Board of Public Utilities, which is requesting rate relief for the first time in 12 years. The company also filed for permission to revise its current weather normalization clause to one that would create greater stability of future earnings, as well as protect ratepayers from the volatility created by swings in weather.

In addition, NUI said it has developed plans that are expected to enhance operations and provide efficiency gains in several areas of its non-regulated businesses in 2003. NUI also pointed to greater volatility in the natural gas markets, which could provide more opportunities for both NUI’s retail marketing business and trading and portfolio management business.

“As a result of the potential significance of these positive factors on our future results, we do not believe it would be appropriate to provide an earnings range for fiscal 2003 at this time,” said Kean. “However, excluding the positive factors mentioned earlier and assuming continued economic weakness and a return to more normal weather, 2003 earnings per share are expected to improve by at least 30% over those in fiscal 2002. We expect these factors to be somewhat clearer by the end of the calendar year and we will be better positioned to issue fiscal 2003 earnings guidance at that time.”

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