Brisbane-based Macarthur Coal posted a sharp drop in first half net profit yesterday but says the full year is still on track.
The company has already signalled that earnings in 2007 would be lower because of various reasons but especially lower export prices as well as problems at the export and rail facilities and changes in mining policy.
Macarthur said that first half profit fell almost 50 per cent to $42.4 million, from $82.1 million in the first six months of 2006 financial year.
“Macarthur Coal’s profits were primarily affected by the 30 per cent reduction in the US dollar coal price in April 2006 from the record previous price,” the miner said.
But analysts said the result was better than the the market had been expecting and the coal miner has reaffirmed its guidance for a net profit of $63 million to $73 million which was given at the 2006 AGM.
Sales fell 22 per cent to $216.2 million from $277.6 million.
“Rain has impacted coal mining in the March 2007 quarter and port congestion has increased,” Macarthur said.
“Coal inventories are also low, leaving the company without stocks to cover unplanned production stoppages.
“Despite the weather-related delays in shipping, the company confirmed that it expects to meet its 4.5 million tonne annual shipping target subject to no further interruptions caused by rain or port congestion.”
Earnings before interest, tax, depreciation and amortisation (EBITDA) fell 48 per cent to $64.5 million and the company sliced its interim dividend by half to 11 cents a share from 23 cents a share last year. Earnings per share naturally fell from 47.1c to 22.6c in the latest period.
The shares eased 6c in the sell off yesterday to $4.87.
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Takeover target Housewares International has posted a $29 million loss first half and omitted dividend thanks to its underperforming Australian homewares business.
The $29.1 million net loss for the six months to December 31 compares with a net profit of $11.67 million in the first half of 2006.
The overall result was dragged down by $37.2 million in significant items, primarily a write-down of the assets of the Australian homewares business.
Housewares, which sources products offshore and on-sells to its Australian customers such as department stores, said its Australian homewares division suffered a $6.1 million loss for the six months to December 31.
This compared with a $900,000 loss in the previous corresponding half (and the reason why it has been looking to unload the business, without success).
Housewares said that the continuing losses primarily result from fierce market competitiveness, in particular significant direct import by major customers and associated discounting.
The company has been warning of this for at least 18 months as big retailers, such as Myer and Target, Kmart and Big W move to directly source homewares products from manufacturers in China.
This effectively cuts out middlemen like Housewares International.
The retailers though have been telling the market and importers and agents that this is what was going to happen, and what was happening, so it should not come as a surprise.
Housewares’ underlying net profit, before the one-off items, fell to $8.1 million in the six months to December 31, 2006, down from $14.1 million previously.
Sales of Australian homewares revenue was static at $39.6 million compared with $39.7 million previously: significant discounting and clearance activity contributed to both the slower sales and losses.
Electrical sales (Breville and Kambrook are the best known names) fell almost 6 per cent to $109.7 million but international sales was a small bright spot, 11.1 per cent up to $88.8 million.
Housewares did not give an outlook on the second half saying it was inappropriate because it was in discussions with several parties interested in taking over the company.
It is also conducting a review with Gresham Advisory Partners in evaluating the options for the Homewares Australia business. That would make the third such review in three years.
Last week consumer products marketer and rival homewares operator, McPherson’s withdrew its plans to acquire the division from Housewares.
Yesterday’s result explains that decision quite clearly.
Housewares said “Significant items of $37.2m were primarily write down of assets of Australian Homewares (2005: $2.4m).
“Notwithstanding Australian Homewares losses and significant items of $37.2m (after tax), the net debt to capital employed ratio remains conservative at 38.8% (2005: 35.9%) ”
“An interim dividend could not be considered due to the significant write downs being applied against distributable reserves.”
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Meanwhile it was better news again from struggling car radio and mobile phone retailer Strathfield.
After profits started appearing in the last half of 2006 after a big restructuring, management were confident the trend would continue in the first half of 2007.
And they have. The company says its margins improved across its stores, and net profit for the December half year was $3.3 million, compared to a loss of $3.5 million in the same period of 2006.
Margins grew by 9.2 per cent due to an improved product mix and the impact of the roll out of its franchise stores, which totalled 12 stores at the end of December.
Strathfield listed these items as the key points from the result:
· Half Year Operating Revenue $91.2 million up 5.0% · Comparable Store Margin growth of 9.2% · NPAT of $3.3million up by $6.7million · Net Store Increase over Dec 05: 5 Stores (12 opened 7 closed) · Franchise Stores operating 12 Stores · Increase in Revolving Credit Facility in Sept 06 from $14million to $19million for a further 3 years.
The shares rose a third of one cent to 7c in yesterday’s sell off, a rare rise.
