Duke Energy Corp. plans to slash about 2,000 jobs, or 8 percent of its work force, and expects to post a lower-than-expected annual profit after reporting a 79 percent drop in its third-quarter earnings.
The company said Thursday the decline in its third-quarter results reflected mild summer weather and poor conditions in its non-regulated businesses.
"The work hasn't been fun and it hasn't been easy, but medicine is not supposed to taste good. It's supposed to make you feel better," outgoing chairman and chief executive Rick Priory told analysts on a conference call.
"I believe we're on the road to recovery, but the market suggests it won't be a short road," said Priory, who will turn over control of Duke Energy this weekend to former Duke Energy president Paul Anderson.
Duke Energy, based in Charlotte, employs 25,000 people.
The global energy company reported earnings of $49 million, or 5 cents per share, for the July-September period compared with $230 million, or 27 cents per share, in the third quarter of 2002.
"You were expecting a great quarter and we were expecting to deliver one to you," Priory told the analysts.
Excluding one-time items, Duke earned 35 cents a share. The consensus estimate of analysts surveyed by research firm Thomson First Call was for earnings of 36 cents a share.
Revenue rose to $5.54 billion from $3.98 billion a year ago.
Shares of Duke Energy rose 12 cents to $17.82 in late trading on the New York Stock Exchange.
Duke pared back its full-year earnings forecast to a range of $1.20 per share and $1.25 per share, excluding nonrecurring charges. It earlier forecast earnings of $1.35 to $1.60 a share for the year. Analysts were looking for earnings of $1.32 a share.
Once considered the rising star of the company, the non-regulated North American power-generation and trading division, called Duke Energy North America, has been hit hard by falling revenues. The unit reported a loss of $411 million before taxes in the third quarter, compared to a pretax $107 million loss in the same period a year ago.
"Mild weather, high natural gas prices and low spark spreads in many parts of the nation combined to severely impact DENA's earnings," Duke said in its earnings report.
During the quarter, the company wrote off $254 million of goodwill, which was primarily related to the formation of the North American trading and marketing business.
"This charge reflects the reduction in scope and scale of Duke Energy Trading and Marketing's business and the continued deterioration of market conditions affecting DENA," the company said.
In its earnings announcement, Duke unveiled a plan to reduce annual expenses by more than $200 million beginning in 2004. The job cuts began in August, a Duke spokesman said Thursday.
While Priory appeared to be relaxed and in good humor on his final conference call with industry analysts, he bristled when he was asked by one caller about the future of Duke's annual dividend.
"This is a terrible position to put me in," he said, reminding the analysts that he was leaving his job and would have no say in the decision.
He said he has spoken to Anderson about it and said Anderson "needs to review it and pick a plan that makes the most sense for the company."