In contrast to market reaction to some of the other results released yesterday, the market didn’t really grab the Origin Energy final.
That was despite a 20% rise in 2009 earnings, and hopes for a 15% rise on top of that in the 2010 year.
The market said that the result was sort of OK, but that was that and the shares drifted 30 cents, or 2% lower to $14.70.
That’s in comparison to the share price rises seen for some other groups, such as Woodside, which produced a nice price rise, despite a 12% fall in earnings.
Woodside also cut dividend, Origin is maintaining its payment.
Perhaps it was a sort of hangover from the hectic times almost a year ago when the company was the centrepiece of a takeover battle for its coal seam gas resources that eventually saw it cash those in with a joint venture with US oil major, ConocoPhillips.
2009’s underlying net profit, excluding one off items, rose to $530 million from $443; that stripped out the considerable impact of the ConocoPhillips deal, after the inclusion of the $6.7 billion gain from the gas deal boosted the ultimate bottom line to a profit of $6.941 billion.
Chairman Kevin McCann said in yesterday’s statement to the ASX: “Despite the challenging economic environment, Origin has delivered record profits combined with unprecedented balance sheet strength. We have finished the year with no net debt, cash reserves and undrawn committed debt facilities of $5.3 billion.”
Origin Directors declared a final fully franked dividend of 25 cents per share, almost double the final dividend paid to 30 June 2008.
He said that following the Australia Pacific LNG transaction an additional fully franked dividend of 25 cents per share was paid on 21 November 2008 to rebase the 2008 financial year dividend to 50 cents per share. The 2009 full year dividend is in line with the dividend attributable to the prior year.
Managing director Grant King said, Origin had begun the 2010 year with its existing business well placed to contribute ongoing growth.
Its coal seam gas (CSG) to liquefied natural gas (LNG) joint venture with ConocoPhillips had given it a very strong financial position with access to $5.3 billion of cash and undrawn committed debt facilities.
Following completion of the Australia Pacific LNG joint venture transaction with ConocoPhillips, Origin repaid a substantial portion of its debt facilities.
"Based on current market conditions, Origin expects the underlying profit for the 2010 financial year to be around 15 per cent higher than the prior year," he said.
Mr King said while the past year had been challenging with many companies severely constrained in accessing capital to fund their business, Origin now had plenty of cash.
"Origin is therefore able to fund the many opportunities it has to continue to grow and develop its business," he said.
The company said that within its existing businesses, a number of development projects and acquisitions are expected to contribute to Origin’s financial performance during 2010. These include:
- A full year contribution from the Uranquinty and expanded Quarantine power stations;
- A full year contribution from the 30 MW Cullerin Range Wind Farm in NSW – completed in late June 2009;
- Continued development of domestic CSG production, which is expected to reach more than 100 PJ per annum for Australia Pacific LNG by 2011 (Origin share 50 per cent); the Kupe Gas Project in New Zealand which is expected to open the wells and bring first raw gas ashore in the December quarter 2009;
- The 126 MW expansion of the Mt Stuart Power Station in Townsville – due for completion in late calendar year 2009; and
- Completion of the 630 MW combined cycle gas fired Darling Downs Power Station in Queensland which is expected to be fully commissioned in the latter half of the 2010 financial year.
Mr King said, “Origin also expects increased contributions from Contact Energy based on the presumption that weather in New Zealand will return to more normal levels.
"The Retail business will benefit from the final Queensland Competition Authority decision for 2009 financial year which will result in underlying cost increases being appropriately reflected in tariffs for the coming year."
On Tuesday, James Hardie made some confident statements about its US housing business and its share price rose strongly, and that helped the shares of rival building products group, Boral, to rebound by around 5%.
Yesterday Boral revealed a much forecast 42% fall in earnings, and the shares continued to rise, up another 3.7%, or 21 cents to $5.87, the highest price since last October.
The driver for this strength remains the promise shown in the US where housing starts are now positive and have been so for the last five months, and expectations of better times in Australia as the first homebuyers’ grant delivers growth in the home construction sector.
Both are areas where growth in demand will be vital for Boral (and James Hardie) if they are to show some sustained share price growth.
In Boral’s case there’s the added help coming from higher spending on infrastructure and hints that more and more mining companies are starting to look at resuming scrapped or
