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National Grid: Trading statement
Electricity and telecoms company National Grid said operating performance for the six months to September 2005 has been good. Performance was driven by underlying volume growth in the US, favourable results from UK capacity auctions, favourable weather conditions, a continued focus on efficiencies and a full period contribution from Crown Castle UK.
The better operational performance will not, however, lead to improved profitability because higher commodity costs in America and the weaker US dollar are expected to offset much of the growth. The company hopes to recover the increase in costs from its customers over a period of time but does not specify a time frame.
A reduction in interest costs will ensure that pre-tax profits for the period are ahead of last year.
The US market contributes almost half of the company’s profits and the weakening of margins in this market is a concern. The outlook for commodity prices in general and energy prices in particular, is robust with further increases likely. Consumer resistance to higher electricity and gas prices is growing and margins are likely to remain under pressure dampening growth prospects.
The share trades at 542.46p
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