Mining Boom Struggles in Australia, Qantas Reports First Loss in 17 Years

Marcus Jacob
23 Aug, 2012
New York City

Australian stocks were caught between weak international market sentiments and a growing consensus that the twelve year mining boom may have run out its course. Fortescue reported rising profit and held its earlier guidance for the iron ore industry. Qantas reported its first loss in 17 years.

[R]8:30 PM Sydney – Australian stocks were caught between weak international market sentiments and a growing consensus that the twelve year mining boom may have run out its course. Fortescue reported rising profit and held its earlier guidance for the iron ore industry. Qantas reported its first loss in 17 years.[/R]

Australian markets pared gains of early advance on the growing evidence of widening global slowdown rooted in the euro zone and spreading to resources heave economies.

The latest Chinese manufacturing survey data conducted by HSBC showed growth in August contracted at the fastest pace in nine months.

Today, third largest miner, Fortescue reported full-year net profit increased 53% to US$1.56 billion.

A day ago, BHP Billiton reported a sharp slowdown in earnings and cash flows as the diversified miner battled a plunge in base metal prices and weak demand for iron ore and coal.

BHP also cancelled $20 billion expansion plan for Olympic Dam copper mine and also shelved $20 billion plan to develop the harbor.

The ASX 200 index edged up 7.70 to 4,383.70 and the broader All Ordinaries gained 8.54 to 4,411.80.

The Australian dollar decreased to US$1.051 from US$1.054 on the China slowdown worries.

Qantas - First Loss in 17 Years

Qantas reported its first annual loss since the airline was privatized seventeen years ago and said it plans to cancel orders for 35 aircraft as it battles rising competition from the Middle Eastern and Chinese airlines.

For the year to June, the airline battled high fuel prices, industrial disputes and rising capacities in the long haul markets from the competitors and growing price competition in the domestic market with Virgin.

Qantas reported annual loss of $245 million compared to net profit of $250 million a year ago and revenues of $15.7 billion. For the year, the underlying pre-tax net profit was $95 million. For the year, fuel costs rose 18% to $4.33 billion.

Stock Movers

Resource stocks traded higher after latest earnings from Fortescue and a rise in gold price.

BHP Billiton Limited advanced 25 cents to $33.41 and, Rio Tinto Limited gained 8 cents to $54.18 and Fortescue Metals Group increased 9 cents to $4.24.

Iluka Resources climbed 15 cents $9.92 and Lynas Corporation Limited down 0.5 cents to 66 cents.

Newcrest Mining jumped $1.11 or 4.3% to $26.94 and Kingsgate surged 61 cents or 13.4% to $5.17. Whitehaven Coal slipped 6 cents to $3.48.

The engineering contractor, Monadelphous Group advanced 31 cents to $21.83.

Oil Search Limited increased 9 cents to $7.33 and Santos Limited gained 7 cents to $11.72 and Woodside Petroleum climbed 37 cents to $35.27. Sundance Energy lowered 2 cents to 56 cents.

Seven West Media slid 1 cent to $1.48 after net soared 97% to $229.1 million.

Ten Network up 0.5 cents to 42.5 cents and Fairfax Media declined 5.5 cents or 9.7% to 51 cents.

Fairfax Media dropped after the publishing company reported annual net loss of $2.73 billion after the company lowered valuations on its balance sheet of several publishing properties.

After the close, Gina Rinehart was said to be looking to sell 5% stake in the company for 50 cents a share.

Consolidated Media Holdings closed unchanged at $3.44 after it reported 15.6% decline in net profit.

Metcash down 2 cents to $3.60, Harvey Norman Holdings slid 1 cent at $2.10 and Woolworths gained 4 cents to $29.49. Kathmandu closed unchanged at $1.35.

Commonwealth Bank of Australia slumped 20 cents to $55.14 after it traded ex-dividend of $1.97.

Bank of Queensland lowered 1 cent to $7.64. ANZ added 4 cents to $25. National Australia Bank increased 5 cents at $25.31 and Westpac Banking Corporation slipped 12 cents to $24.77.

Macquarie Group slumped 13 cents to $26.60 and Perpetual Limited jumped 59 cents to $27.59.

David Jones Limited dropped 14 cents or 5.4% to $2.44 and Wesfarmers gained 22 cents to $34.40. Billabong International Limited slid 2 cents to $1.34. Breville Group advanced 19 cents to $5.44. Harvey Norman decreased 1 cent to $2.10.

Reject Shop extended gains by 2.5% to $10.85 a day ago the deep discount retailer reported full-year net soared 35.6% to $21.92 million.

Toll Holdings increased 11 cents to $4.58 and Leighton slipped 14 cents to $17.21 and property developer Mirvac Group lowered 1 cent to $1.38.

Qantas gained 3 cents to $1.20 and Flight Centre declined 10 cents to $23.60 and Virgin Australia down 0.5 cents to 45.5 cents.

QR National increased 8 cents to $3.55 after the railroad operator said it plans to cut 900 jobs and may cut more staff if economic conditions do not improve.

Telstra declined 1 cent at $3.71 and a day ago the telecom operator said it plans to cut 422 full-time staff and 229 positions filled with the help of employment agencies.