A clutch of rising costs, warm weather and market competition has undermined increased revenue and earnings before interest and tax.
Contact chief executive Dennis Barnes gave no year-ahead guidance when announcing the result yesterday, but said the company was positioned for growth, had completed a 1:9 renounceable offer and started work on a new $623 million geothermal power plant.
"Over the coming financial year, Contact's immediate focus will be on delivery, in particular generating value from the newly commissioned assets to raise base earnings, even if wet hydrology continues, and growing [the] retail demand," he said.
However, analysts from brokers Forsyth Barr and Craigs Investment Partners said respectively it was disappointing the financial result was below the bottom range of analysts' expectations.
It was also disappointing that the outlook was not strong for 2012.
Revenue was up 3% from $2.16 billion last year to $2.23 billion, while earnings before interest and tax were up the same percentage, from $260.7 million to $269.2 million.
Craigs broker Peter McIntyre said while Contact's outlook was to grow its base earnings, there was no clear upside growth above Craig's current expectations, which are well below other market forecasts.
While the result following the effects of the Canterbury earthquakes and warmer temperatures during the past year was "not good", Mr McIntyre said two North Island plants were well placed to drive earnings up during 2012.
Shares in Contact, which has cut its full-year dividend from 25c to 23c, were initially down almost 2% on the announcement, then turned around and made a 4% gain to trade up at $5.10.
Forsyth Barr broker Peter Young said earnings before interest, tax, depreciation, amortisation and financials came in at $441.4 million, down $9.6 million on its $451 million forecast.
"This result is also below the bottom of the analyst range, with the lowest forecast being $448 million.
"So a disappointing result from Contact, although in reality we always knew the result was going to be bad.
"It was simply a question of how bad," Mr Young said.
On cutting its dividend for the full-year, it had always been a possibility, he said.
"The current profits cannot sustain the current dividend and given Contact's capital expenditure programme, it is the prudent thing to do." Revenue came in 0.9% better than forecast, mainly from wholesale electricity sales, but costs were up 1.7%, or $30.4 million higher than forecast, due to several factors, he said.
Electricity purchases were $14 million higher than forecast, carbon emission costs were $5 million higher than forecast, Mr Young said.
Transmission and distribution costs were $6 million higher and the retail and overhead costs were $19 million higher, the latter mainly driven by the Christchurch earthquake, he said.
Mr Barnes said costs were reduced in the second half of the year, with the introduction of a gas storage facility and separate peaker plant which enabled Contact to meet demand spikes with new assets operating at a reduced cost, compared to the alternative of gas-fired turbines.
