A down quarter for Price Group

Roche warns of profit decline and belt-tightening

April 06, 2001|By Bill Atkinson | Bill Atkinson,SUN STAFF

T. Rowe Price Group Inc.'s top executive said yesterday that he expects first-quarter profit to be "moderately below" the 43 cents per share reported for last year's fourth quarter, and that expenses will be pared.

Profit in the quarter will be markedly less than the 58 cents per share the Baltimore-based mutual fund company made in the first quarter of 2000 when the stock market boomed, George A. Roche, chairman and president, told shareholders and company officials at Price's annual meeting at the Harbor Court Hotel downtown.

"The first quarter was a very difficult one and most sectors of the stock market declined," Roche said. He said the company's assets under management had slipped 11 percent to $94.8 billion on March 31, down from $106.3 billion on Dec. 31, 2000.

"Although this is a point of concern for us, our broadly diversified asset base and the sizable percentage of assets in retirement accounts puts us in a relatively strong position over the long run," Roche said.

As a result of the market's downturn and decline in assets under management, Roche said, the company is "closely reviewing" its expenses.

"We will look at all of our expenses," he said after the meeting.

He said that he does not believe the tightening will result in job cuts. "We have not found it necessary to have any material reduction in staff," he said.

Price's shares closed at $31, up $2.44 on a day when stocks soared and the Dow Jones industrial average rose 402 points. Price's shares are down 26.65 percent since the year began.

Steve Hahn, an equity analyst at Morningstar Inc., the Chicago-based mutual fund information company, said he wasn't surprised that Price's profit and assets under management both declined in the quarter.

"It looks like it is going to be a ... trend in the asset management industry," he said. "Assets under management have been falling substantially for almost every fund company."

Most mutual fund companies spend heavily on marketing and travel, he said.

"I think they [Price] can shave a lot of their expense down," Hahn said. "I do think that they can improve their expense line without resorting to layoffs."

Although 2001 hasn't been easy for Price, its accomplishments last year were substantial. Revenue and profit both reached record levels. Revenue jumped 17 percent to $1.2 billion and net income was $269 million, up 12.4 percent from the previous year.

Despite the market's wild swings, Roche told shareholders, the company will continue to invest in the business. "We have made a major commitment to expand our international business and are investing in other parts of our business, as well," he said.

Last year, Price bought its British partner's 50 percent stake in their joint money-management venture, Rowe Price-Fleming International Inc., for $780 million in cash.

"This transaction was the most significant event for our company since going public in 1986," Roche said. "It brings under our roof an impressive array of investment talent and experience, as well as offices around the world. It also opens the opportunity for us to expand abroad."

Roche said the company is "interested in acquiring assets under the right circumstances." And that it is "highly unlikely" the company would merge with another organization.

"We have made it very clear that we want to be an independent company," he said after the meeting.

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