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South Jersey Industries Inc. Reports Operating Results (10-Q)
Posted by: gurufocus (IP Logged)
Date: November 8, 2011 04:36PM

South Jersey Industries Inc. (SJI) filed Quarterly Report for the period ended 2011-09-30. South Jersey Industries Inc. has a market cap of $1.7 billion; its shares were traded at around $56.55 with a P/E ratio of 20.2 and P/S ratio of 1.8. The dividend yield of South Jersey Industries Inc. stocks is 2.6%. South Jersey Industries Inc. had an annual average earning growth of 4.6% over the past 10 years.



Highlight of Business Operations:

SJG s revenues decreased $16.5 million, or 5.3%, during the nine months ended September 30, 2011 compared with the same period in the prior year, after eliminating intercompany transactions. Firm sales revenue decreased $19.0 million, or 6.5%, during the first nine months of 2011 versus the same period in 2010, as the result of lower natural gas costs which precipitated the return of $21.1 million in the form of a customer refund in March 2011. The average cost of natural gas purchased during the first nine months of 2011 was $6.19 per dt, representing a 8.6% decrease relative to the average cost of $6.77 per dt during the same period in 2010.

SJE s revenues from retail gas, net of intercompany transactions, decreased by $3.4 million and $3.9 million, or 14.1% and 4.6%, for the three and nine months ended September 30, 2011, respectively, compared with the same periods in 2010. The decrease in revenues for the comparative periods was mainly due to the loss of one large volume customer under contract in 2010 with a higher fixed price which was replaced in 2011 with several lower priced market customers. Also contributing to the decrease in revenues was a 4.25% and 8.38% decrease in the average monthly New York Mercantile Exchange (NYMEX) settle price, which was partially offset by a 2.5% and 7.8% increase in sales volumes for the comparative three and nine month periods, respectively. As of September 30, SJE was serving the following number of retail gas customers:

SJE s revenues from retail electricity, net of intercompany transactions, increased $7.0 million and $32.1 million, or 16.7% and 25.1% for the three and nine months ended September 30, 2011, respectively, compared with the same periods in 2010. Excluding the impact of the net change in unrealized gains and losses recorded on forward financial contracts due to price volatility of $(6.1) million and $(11.8) million, revenues increased $0.9 million and $20.3 million, or 1.7% and 14.8%, for the three and nine months ended September 30, 2011, respectively, compared with the same periods in 2010.

SJRG s revenues, net of intercompany transactions, decreased $27.0 million and $22.0 million, for the three and nine months ended September 30, 2011, respectively, compared with the same periods in 2010. Excluding the impact of the net change in unrealized gains and losses recorded on forward financial contracts of $13.2 million and $(5.4) million, respectively, due to price volatility and adjusting for the change in realized gains and losses on all hedges attributed to inventory transactions of $(0.2) million and $1.3 million, respectively, to align them with the related cost of inventory in the period of withdrawal, SJRG s revenues decreased $14.0 million and $26.1 million for the three and nine months ended September 30, 2011, respectively, compared with the same periods in 2010.

Gross margin for SJRG decreased $13.7 million and $12.4 million for the three and nine months ended September 30, 2011, respectively, compared with the same periods in 2010. Excluding the impact of the net change in unrealized gains and losses recorded on forward financial contracts of $13.2 million and $(5.4) million, respectively, due to price volatility and adjusting for the change in realized gains and losses on all hedges attributed to inventory transactions of $(0.2) million and $1.3 million, respectively, to align them with the related cost of inventory in the period of withdrawal as discussed above, gross margin for SJRG decreased $0.7 million and $16.5 million for the three and nine month comparative periods. For the three month comparative period, the change in gross margin was due in part to the withdrawal of 2.5 bcf of storage during 2010 which reduced gross margin by approximately $4.1 million during the three months ended September 30, 2010. Offsetting the comparative impact of the storage withdrawal in 2010 which did not recur in 2011, gross margin was negatively impacted by approximately $3.0 million during the three months ended September 30, 2011 as a result of increased production of natural gas in the Marcellus region where SJRG has committed to purchase minimum volumes at index based prices. This increased production has caused temporary take-away constraints throughout the region which has resulted in a decrease in market prices. Market prices are expected to improve as additional capacity is brought on line beginning in November of this year. The remaining $1.8 million decrease in gross margin during the three months ended September 30, 2011 as compared to the the same period in 2010 was due mainly to tighter spreads attained on our storage and transportation assets. For the nine month comparative period, the decrease in gross margin was also due primarily to the tighter spreads attained on our storage and transportation assets. Storage assets allow SJRG to lock in the differential between purchasing natural gas at low current prices and selling equivalent quantities at higher future prices. Gross margin is generated via seasonal pricing differentials. While this margin will be attained over the transaction cycle, the timing of physical injections and withdraws and related hedge settlements can cause earnings fluctuations for accounting purposes due to the volatile nature of wholesale gas prices. Overall, SJRG's contribution to margin from storage and transportation assets has decreased due to market conditions and we have begun to shed some of these assets. However, we expect to continue to add incremental margin from marketing and related opportunities in the Marcellus region, capitalizing on our established presence in the area. Future margins could fluctuate significantly due to the volatile nature of wholesale gas prices.

Read the The complete Report



Stocks Discussed: SJI,
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