Utility giant Tenaga Nasional has announced a 57.3 percent increase in its net profit for the year on the back of higher sales and foreign exchange gains.

The company recorded a profit of RM1.28 billion in the year to August, compared to RM813.7 million the previous year, with electricity sales increasing by 6.4 percent.

A strengthening ringgit compared to the major currencies the group was exposed to contributed to a gain of RM141.8 million, compared to the loss of RM571.8 million in the corresponding period last year, Tenaga said in a statement yesterday.

Improved efficiency in collecting from delinquent accounts, a fall in general expenses and a cut in transmission and distribution losses all contributed to the improved bottom line, it said.

However, the result was below expectations, with brokerages predicting a higher net profit of RM1.4 to RM1.81 billion for the year.

Higher operating costs

The company also noted operating costs had increased by 10.1 percent compared to the previous year, reducing the group's operating profit by 5.7 percent from RM3.26 billion to RM3.16 billion.

"The increase in coal price was the main contributor to the higher operating expenses where the average price increased from 34.0 to 49.8 dollars per tonne," it said.

"The costs of other operating expenses have also increased and together with the increase in coal prices have offset the increase in revenue of 7.1 percent."

Higher operating expenses also contributed to a 9.5 percent drop in its fourth quarter earnings to August, which fell to RM403.6 million from RM446.4 million a year ago.

Tenaga said growth in electricity demand for 2006 was expected to be stable and it had started initiatives to improve operating efficiency, but noted higher operating costs would continue to be a factor.

"However, as prices are expected to rise, that may have an impact on operating costs. The board of directors is of the view that such circumstances may pose a challenge to the performance of the group for the fiscal year to August 2006," it said.