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COLUMBUS — American Electric Power said Thursday its first-quarter profit dropped 4 percent as the lingering effects of the recession continue to hurt power demand.
AEP posted a profit of $344 million, or 72 cents share, for the three months ended March 31 compared with $360 million, or 89 cents per share, in the year-ago quarter. Without one-time charges the company would have earned $365 million, or 76 cents per share, for the latest quarter.
Like other power companies, AEP has struggled with lower power demand because of the recession. The company said electricity demand remains constrained even though it has seen signs of economic improvement.
As one of the nation's biggest power companies, with 5.2 million customers from Michigan to Texas, what AEP says about power demand reflects how the economy is performing.
Revenue increased to $3.6 billion from $3.5 billion in the year-ago quarter. Analysts surveyed by Thomson Reuters expected AEP to earn 78 cents per share on revenue of $3.66 billion.
AEP said residential sales rose 8.6 percent in the quarter, but commercial and industrial sales fell by 1.2 and 1 percent, respectively. Industrial consumption has been especially weak. It fell 16 percent last year as automakers and steel companies cut production and scaled back operations. AEP said it is no longer seeing steep declines.
Mike Morris, AEP's chairman, president and CEO, said the company sees economic improvement in the states it serves. "But the signs have yet to be followed by a broad increase in electricity demand that typically accompanies economic improvement," he said.
Morris told analysts that sales volumes in the eastern businesses continue to be a concern.
"The aluminum manufacturers have yet to come back in business in Ohio and West Virginia, and that's obviously a volume metric and revenue stream issue for us," he said. "And we're seeing, as we had seen before in the 1980s and in some of the other shorter recessions, a real lag in recovery of commercial sales."
Chief Financial Officer Brian Tierney said commercial, residential and industrial sales improved in AEP's western utilities during the quarter. Discounting two large aluminum customers, industrial sales in the East would have been higher, he said.
Despite the profit decline, Morris called the results "strong." He credited higher rates, increased off-system sales and a colder-than-normal winter.
Edward Jones analyst Paul Franzen said demand for electricity during the quarter seems to be coming back more slowly for AEP than for other utilities.
"Demand is headed in the right direction at AEP, it's just taken a little longer than anticipated," he said.
To make up for sluggish demand, AEP is working to cut costs. The company has announced a buyout to cut its work force by up to 10 percent.
Because of the cost-cutting efforts, AEP reaffirmed its earnings guidance of $2.80 to $3.20 per share for the year.
Analysts surveyed By Thomson Reuters expects AEP to report profit of $3.23 per share.
AEP's first-quarter included a $21 million charge because of the recently enacted federal health care overhaul. The company's per share profit for the quarter was reduced by 13 cents from a year ago because the company issued additional shares in 2009.
AEP shares rose 32 cents to close at $33.84 on Thursday.
