Earnings decline 11% at Sempra Energy

Utility owner Sempra Energy said Wednesday that its first-quarter earnings fell 11% and missed Wall Street expectations but blamed the shortfall on accounting rules that cut into commodities trading profit.

Despite the profit slide, Sempra Chief Executive Don Felsinger said he was pleased with the results. He declared that San Diego-based Sempra, which owns Southern California Gas Co. and San Diego Gas & Electric Co., was on track to meet its full-year earnings estimate of $3.75 to $3.95 a share.

“All of our operating businesses performed at or above last year’s levels,” Felsinger told analysts. Although accounting rules deferred some of the trading group’s first-quarter income, he said, “we do, however, expect the majority of those profits to be recognized later this year.”

Sempra’s net income totaled $228 millionin the first three months of the year, down from $255 million in the year-earlier period. Income from ongoing operations of 86 cents a share was below analysts’ average estimate of 94 cents, according to Thomson Financial.

The unit that trades natural gas, metals and other commodities was Sempra’s top earner, with profit of $71 million for the quarter, but that was down 39% from the year before. Adding back income for both quarters that was earned but deferred under accounting rules, the trading operation would have posted earnings of $157 million, down from $160 million.

“The commodities trading business is volatile, and that’s where the disappointment comes from,” said Jonathan Monk, who manages investments worth $1.3 billion, including an undisclosed number of Sempra shares, at Aerion Fund Management in London. “The expectation was that they might boost their forecast for the year, and they affirmed it.”

Sempra’s two utilities posted higher profits. SDG&E;’s net income jumped 32% to $62 million for the quarter, while net income at the SoCal Gas, the nation’s largest gas utility, rose 12% to $55 million, Sempra said.

The generation business, which produces and sells power on wholesale markets, booked quarterly profit of $54 million, up 32%. The pipeline and storage business reported $16 million in net income, up more than 45%.

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Bloomberg News contributed to this report