Qantas Net Drops; Wesfarmers Net Rises 1%

Darlington Musarurwa
18 Feb, 2010
New York City

Australian benchmark index closed lower after Qantas reported lower than expected net on higher write-downs. Wesfarmers profit rises 1% to A$879 million in the first half. Comparable store sales at Coles increased 6% but earnings at mining operations declined.

[R]3:00 AM New York, 7:00 PM Sydney – Australian benchmark index closed lower after Qantas reported lower than expected net on higher write-downs. Wesfarmers profit rises 1% to A$879 million in the first half. Comparable store sales at Coles increased 6% but earnings at mining operations declined.[/R]

Australian stocks fell 0.3% after Qantas reported that first half profit decreased 72%, raising fears of the legacy effects of the global financial crisis. The company forecasts that full year profit will be affected by soaring fuel prices and revaluations.

Of the ASX 200 index stocks, 86 rose, 100 fell, and 14 were unchanged. Qantas Airways Limited led decliners with a loss of 8.0% as the carrier’s interim profit dropped.

Qantas Profit Drops 72% in H1

Qantas reported today that net income fell 72% to A$58 million in the six months ended December from the same period a year ago. Analysts were looking for earnings between A65 million and A$70 million.

The airline took write downs on aircraft of A$48 million related to changes in the recoverable value of the number of wide-body aircraft held for sale following capacity reductions announced last year.

Statutory profit before tax was A$90 million in the period, in line with the previous guidance between A$50 million and A$150 million.

Qantas chief executive officer Alan Joyce said the airline is beginning to benefit from capacity reductions and restructuring activities implemented since April 2009.

“We are well placed to deliver the 2009/2010 target of A$500 million in benefits, with more than A$200 million in sustainable savings and efficiencies achieved to date.”

The carrier says fuel costs are projected to be A$200 million higher in the second half compared to the first half, while depreciation costs will be A$50 million higher due to reassessment of aircraft residual values.

Qantas projects that underlying profit before tax for the full-year ending June 2010 will be in the range of A$300 million and A$400 million.

Wesfarmers H1 Profit Gains 1% to A$879 million

Wesfarmers reported that its first half net profit gained 1% to A$879 million from a revised A$871 million a year buoyed by a turnaround of its retail division. Revenues rose to A$26.53 billion from A$26.3 a year earlier.

Coles supermarkets division, like-for-like food and liquor sales gained 6%, total food and liquor revenue increased 7.5% to A$ 12 billion.

Strong sales in higher-margin fashion categories helped that division grow earnings before interest and taxes by nearly 30% to A$279 million.

However, earnings from the resources division dropped on lower global export coal prices.

Wesfarmers increased an interim dividend of 55 cents from 50c a year ago.

ASX Movers

Qantas Airways Limited led the decliners in the S&P ASX 200 index with a loss of 8.0% followed by losses in Sims Metal Management Limited of 7.9%, in St Barbara Limited of 5.8%, in Equinox Minerals Limited 5.3% and in Aristocrat Leisure Limited 5.3%.

Emeco Holdings Limited led gainers in the S&P ASX 200 index with a rise of 4.8% followed by gains in Western Areas NL 4.6%, in IOOF Holdings Limited of 4.1% and in Coca-Cola Amatil Ltd of 4.0%.

Other Movers

ASX Limited added 2.9% to A$36.92 after the stock-market operator said first-half sales rose 5.7% to A$302.8 million from A$286.3 million a year ago. Net profit for the first-half fell 2.3% to A$168 million or 97.8 cents per diluted share compared to net profit of A$171.9 million or 100.3 per share a year ago.

BHP Billiton plc the mining company fell 1.1% to A$40.93.

Coca-Cola Amatil Ltd gained 4.0% to A$11.00 after the soft-drinks maker was upgraded to “overweight” from “neutral” at JPMorgan Chase & Co.

Qantas Airways Limited decreased 8.0% to A$2.73 an airline company said first-half sales fell 14% to A$6.9 billion from A$8.07 billion a year ago. Net profit for the first-half fell 72% to A$58 million or 2.6 cents per diluted share compared to net profit of A$210 million or 10.7 per share a year ago.

Santos Limited declined 1.0% to A$13.47 after the oil and gas explorer said full-year sales fell 21% to A$2.18 billion from A$2.76 billion a year ago. Net profit for the full-year fell 74% to A$434 million or 51.9 cents per diluted share compared to net profit of A$1.65 billion or 242.8 per share a year ago.

Sims Metal Management Limited dropped 7.9% to A$19.79 after the metals recycling company said first-half sales fell 39% to A$3.4 billion from A$5.6 billion a year ago. Net profit for the first-half was A$39.9 million or 21.2 cents per diluted share compared to net loss of A$79.4 million or 43.7 per share a year ago.

Transurban Group rose 3.3% to A$5.27 after the toll road operator was upgraded to “buy” from “neutral” at UBS AG.

Wesfarmers Limited advanced 3.2% to A$30.60 after the supermarket giant Coles owner said first-half sales rose 0.4% to A$26.5 billion from A$26.4 billion a year ago. Net profit for the first-half rose 1% to A$879 million or 76.1 cents per diluted share compared to net profit of A$871 million or 103.3 per share a year ago.

WorleyParsons Limited rose 0.6% to A$24.15 after the resources services provider said first-half revenues fell 20.1% to A$2.50 billion from A$3.13 billion a year ago. Net profit for the first-half fell 30.1% to A$138 million or 56.3 cents per diluted share compared to net profit of A$197.5 million or 80.8 per share a year ago.