It will be a week when the ink turns to bright red and spreads all over the last five days of the interim reporting season.
The focus is likely be on profit reports with companies due to report including BlueScope, Fairfax, the Seven Network, Westfield, Origin Energy, Seven, Telstra, Harvey Norman, QBE and Woolworths.
Babcock & Brown, Babcock & Brown Infrastructure, Babcock & Brown Power, Centro Retail, Centro Properties Group, GPT, ING Community Living, ING Industrial Fund and Oz Minerals are due to report as well. They will all be terrible.
Then you have the likes of Asciano, Toll, Lend Lease and Macquarie Airports which should also produce write-downs, lower profits or big losses.
And we will get results from James Packer’s Crown and Consolidated Media Holdings that won’t impress investors.
Apart from the likes of Woolies and Origin and possibly Telstra, this will be a week when lots of companies reveal poor results.
For example a loss could come from retailer, Harvey Norman that might surprise some investors, while giant insurer, QBE will probably surprise with a worse than expected result because of lower returns from its investment funds.
Asciano is on a lot of analysts near death list, such is the size of its debt; the Babcock & Brown group of companies won’t be reporting nice news, nor will Centro and the ING funds and Oz Minerals will be horrid.
In fact Oz Minerals CEO Andrew Michelmore told ABC TV’s Inside Business yesterday that the company faced administration if the Minmetals takeover didn’t proceed.
He said it would be very hard to find new buyers if the Chinese company’s bid was knocked back, especially as Oz had faced administration and receivership a couple of times since its financial problems emerged last November.
Cuts to dividends are likely to remain key themes as companies try to swap difficult-to-obtain and expensive debt for equity capital. Huge losses will abound.
Fairfax is possibly a key stock to watch for that reason, and a possible write-down in asset values.It reports today.
It has already cut dividend. Could it follow the New York Times Co which late last week suspended its already trimmed quarterly dividend to build up cash?
After the Ten Network failed to raise $90 million last week, Fairfax might find it tough to raise funds this week if it has to.
The Seven Network has already warned the market of a 50% drop in first half earnings.
What analysts want to know is if ad sales are falling sharply this year so far, as they did in the closing months of 2008
Westfield is being eyed by analysts for another round of write-downs.
Changing capitalisation rates has already forced a $3 billion cut in asset values, which were offset by the impact of the weaker dollar on the company’s asset values: the $A value of the assets rose on translation from US dollars mostly.
But analysts are now looking for actual write-downs in the value of some of the group’s 119 malls here, in New Zealand, the US and UK.
A major US competitor, General Growth Properties warned Friday night that it might have to go into bankruptcy protection because it can’t pay some debts.
It has won a small extension on one loan, but is facing problems on others in the Las Vegas area.
Origin’s result will be strong after the sale of its Queensland gas assets to ConocoPhillips last year; BlueScope will be hit by the global steel slump and will warn of a possible loss this half because of the cost of relining its main Port Kembla blast furnace from next month.
Profit growth over the year to the December half last year looks likely to have been around -2% based on the companies to have reported so far.
However, the profit reporting season hasn’t been as bad as feared.
Of the 72 major companies to have reported so far, 32% have come in above expectations which although worse than the average of 48% over the previous 5 years is at least better than in the last reporting season.
The AMP’s Dr Shane Oliver says "Negative surprises are running below that of the last two reporting seasons although this is partly due to company pre-announcements and guidance.
"Key themes have been dividend cuts with 29 of the 72 major companies to have reported so far cutting or eliminating dividends, pressure on margins reflecting the inability of companies to pass on cost increases in the tough economic environment, significant asset write downs and cautious and in many cases non-existent outlook statements," he said.
In the US banks are leading the companies in the S&P 500 to their first cumulative quarterly loss.
According to Bloomberg figures, the 69 financial companies in the index that have reported fourth-quarter results lost a combined $US41.6 billion, their third straight quarterly shortfall.
As a whole, the 400 that have so far released fourth-quarter results lost a combined $US75.5 billion, according to Bloomberg.
Bloomberg said that Standard & Poor’s projects a per-share loss of $US11.97, the first deficit in quarterly data going back to 1936.
In Europe, Bloomberg said that profits have declined 82% for 171 companies in the Stoxx 600 that have released results since January 12.
Analysts still expect European profits to rise 4.4% this year, after falling 29%. That’s extremely optimistic, especially given the poor state of the huge German economy.
