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Centrica keeps profit outlook as gas prices rise
By Pete Harrison
LONDON (Reuters) - British energy firm Centrica <CNA.L> said on Friday its market had become more challenging due to rising wholesale gas prices, but its underlying year profit would be broadly as expected.
It said its British Gas Residential unit had continued to add customers in the second half, regaining the number lost in the first quarter, and taking it back to the 16 million with which it started the year.
British Gas lost around 250,000 customers early in the year, but turned the losses around by cutting prices in March and again in April, by a total 20 percent for gas and 17 percent for electricity.
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This contrasts with last year when it lost over 1 million customers amid rising gas prices and customer service issues.
"The company has performed well in 2007 although market conditions have become more challenging in recent months as wholesale gas prices have risen," it said.
"This has altered the mix of the group's profits significantly, leaving underlying pretax results in line with expectations but with a slightly increased effective tax rate."
Centrica shares were down 0.5 percent to 362.5 pence by 0814 GMT, valuing the group at around 13.7 billion pounds.
"Overall it is positive in tone but the detail looks less than positive and we suspect there will be downgrades to consensus 2007 EPS estimates of around 7.5 percent," said analysts at Cazenove.
Centrica said it expected British Gas Residential to be profitable in the second half of the year, despite higher wholesale gas prices reducing margins for gas and power.
The higher wholesale prices have also led to increased gas and oil production by its Centrica Energy division, and it sees year production slightly ahead of last year.
"The shift in profits from downstream to the more highly taxed upstream is expected to increase the group's 2007 tax rate from current market forecasts to just under 40 percent," it added.
(Reporting by Pete Harrison; Editing by Paul Bolding)
