Earnings Decline Hurt Stocks

123jump.com Staff
20 Feb, 2008
New York City

In Australia ASX 200 index fell 2.1% to 5,496.50 as reported earnings declined on rising dollar and operating costs. Woodside Petroleum rose 4.6% on the expectations that the company will successfully raise $12 billion to complete its LNG plan this year. However, net profit after tax in 2007 fell 15% excluding one time charges. Macquarie Office Trust increased its distributable earings by 25% to 7.94 cents per unit. Oxiana net profit in 2007 declined to $318 million from $553 million in 2006.

[R]3:00AM New York, 7:00PM Sydney - ASX 200 index fell as reported earnings decline on rising operating costs and surging Australian dollar.[/R]

Market Sentiment

ASX 200 index fell 2.1% or 122.6 to close at 5,496.50

The Preliminary market turnover was 1.52 billion shares worth $6.8 billion, with 500 stocks moving up, 701 moving down and 339 unchanged. The most actively traded stock was Flinders Diamonds with 85.2 million shares worth $11.1 million.

Market Driver

Australian oil and gas producer, Woodside Petroleum Ltd indicated that it is considering injecting an additional $12 billion on the expansion of its biggest liquefied natural gas project this year as prices and demand for the fuel soar.

Woodside chief executive Don Voelte told in a conference call that the company was considering injecting the money for the first-phase of its Pluto 2 project by year-end. The project involves tapping gas from fields off northwestern Australia. The news was first reported on Bloomberg and AAP.

The company said it was also pursuing the approval of another project, Sunrise LNG, in the Timor Sea by 2009. The enactment of the LNG project would put the company in a position to benefit from demand that it predicts would double by 2015. Woodside''s share gained 4.6% on the news.

Meanwhile, Woodside today reported net profit after tax of $1,030 million, 28% lower from $1,427 million in the previous year, after realizing a net loss of $152.2 million on significant items.

By comparison, the company said allowance was made in the 2006 net after tax profit of $1,427.0 million for items relating to the sale of Kipper interests with a gain of $31.1 million.

After removing the effect of the one-time gains or losses from the sale of various assets, Woodside''s 2007 underlying net after tax profit of $1,182.4 million was 15% lower than the comparable profit in 2006.

This, the company said was largely due to a higher exchange rate, higher exploration expenses and increased depreciation and amortization charges which outweighed the benefits of both higher production and commodity prices.

Gainers and losers

Of the ASX 200 index stocks, MacMahon Holdings led the gainers with a rise of 9.5% followed by increases in CSL Limited of 9%, in Mount Gibson Iron of 6.1%, in Perilya Limited of 5.9%, and in Lynas Corp Limited of 5.8%.

Of the ASX 200 index stocks, AED Oil Limited led the decliners with a fall of 10.2% followed by losses in Riversdale Mining of 9.6%, in APN/UKA European of 9%, in Wesfarmers Limited of 7.5% and in Cochlear limited of 7.2%.

Macquarie Office Trust''s distributable earnings up 25%

Australia''s largest listed office property trust, Macquarie Office Trust today announced a 25% increase in its distributable earnings to $160.6 million representing 7.94 cents per unit during the half year ended December 2007.

The company said gains on the sale of assets in Australia and the U.S. contributed $47.4 million or 2.34 cents per unit in the six months while normalized distributable earnings were 5.6 cents per unit. The company was set to raise an additional $3.7 million after the sale of Lang Centre.

Macquarie said it achieved an average 29% leveraged return on 8 asset sales over the past three years. However net income fell to $244.1 million from $455.6 million in the year-earlier period after valuation gains plunged 44%.

Macquarie Office Trust''s chief executive, Adrian Taylor said, ""The Trust''s strategy and the strength of its portfolio have delivered a solid result. The quality of the Trust''s portfolio continues to attract premium customers, securing high occupancy rates and long weighted average lease expires, which in turn delivers more stable cash flow."" Its shares fell 5%.

Oxiana posts $318.2 in profits

The operator of the biggest mine in Laos, Oxiana Ltd today announced that net after tax profit was $318.2 million for the year ending in December 2007 lower than $553.2 million in 2006.

Oxiana''s earnings before interest, tax and depreciation were $595.1 million against $827.2 million for the year before. The company said strong production levels were offset by a stronger Australian dollar, a weaker zinc price, and a higher effective tax rate in Laos.

Oxiana''s balance sheet strengthened, reflecting net assets of $1.5 billion at year-end. During the year under review, Oxiana invested almost $700 million in new property plant and equipment, with the largest single item for the construction of Prominent Hill funded from cash flow. Oxiana will retain a positive cash balance of $246 million at year-end after the capital investment.

In 2008, the company expects to complete projects Prominent Hill, the Sepon copper expansion and the Martabe gold project.

A final dividend of 4 cents per share was declared, following the interim dividend of 4 cent. Oxiana stock gained 2.1%.

CSL posts $349 million in profits

CSL Limited today announced a profit after tax of $349 million for the six months ended December 2007, up 36% from a year ago including negative impact of $28 million related to foreign exchange translation. Total revenue surged 20% to $1.9 billion compared to a year ago or up 29% when adjusting for currency.

Net operating cash flow rose 57% to $293 millon and earnings per share were up 35% to 63.4 cents. Interim dividend rose 41% to 23 cents per share, payable on 14 April 2008.

CSL sales rose 3% to $1.4 billion compared to a year ago. Robust performance across the plasma product portfolio in both core and specialty products sustained sales.

CSL Managing Director, Dr McNamee said, ""All CSL divisions contributed solidly to the Company''s excellent first half. We achieved significant profit growth despite an environment of significant adverse currency movements."" CSL''s share gained 9%.

Virgin Blue''s share falls as net income declines

Australia''s second-biggest carrier, Virgin Blue, fell 10.5% after the company announced today that its net income declined to $113.3 million in the six months ended December 31, from $124.3 million a year earlier.

Its sales rose 8.1% to $1.21 billion. The company also registered a 5.2% rise in revenue per available seat kilometer to 10.10 cents.

The company sold in January 83.4% of its available seats compared to 83.3% a year earlier. The company hired Goldman Sachs to find ways to realize higher asset valuation from its current market cap of $1.4 billion.

It added that board aims to complete the review within the next few weeks. Virgin Blue posted 8.8% drop in first-half net income on higher costs to challenge Qantas Airways Ltd. routes to the U.S.

The airline also faces increasing competition on domestic routes from Tiger Airways Pte, which entered the market in November.

Zinifex extends takeover offer

Zinc producer Zinifex today extended its takeover offer for Allegiance Mining for the second time by another two weeks from the closing day on Friday.

In its notice to the Stock Exchange, the company said it required an extension because it hasn''t secured enough shares. The original deadline for the $700 million proposal was extended by three weeks.

""In relation to Zinifex Australia Limited''s off-market takeover offer for all the ordinary shares in Allegiance Mining, we attach a formal notice of variation which was lodged with ASIC and Allegiance today and which will also be sent to Allegiance shareholders that extends the Offer period, together with an accompanying letter sent to Allegiance shareholders,"" read the statement.

Allegiance is set to open its nickel mine on Tasmania''s West Coast soon.

Midwest rejects Sinosteel offer

Australian prospector Midwest Corp, buoyed by a big jump in iron ore prices this year, rejected a $1 billion-plus takeover proposal from its major shareholder, the Chinese commodity trader, Sinosteel.

Midwest''s chief executive, Bryan Oliver said Midwest had been unable reach an agreement with Sinosteel over its offer of $5.60 a share and valuing the company at $1.19 billion.

This is the second rejection of a suitor by Midwest, which believes its potential to capture a sizeable chunk of booming sales of iron ore to Asian steel makers is not fully appreciated.

Iron prices are likely to continue rising after this weeks agreement between Japan''s four largest steelmakers, POSCO of South Korea and Brazilian mining giant Vale to pay 65% more for iron ore in 2008.

Oliver told Reuters today that the agreement with Vale was at the top end of forecasts and the price could be even better for Australian ore.

""That gives us a lot of confidence there are still a lot of legs in the next couple of years in terms of our share price,"" Oliver said.

Shares in Midwest lost 7%.