The strong Australian dollar emerged as a big factor confronting three well performing Australian companies at the annual meetings yesterday.
In contrast to the pay dispute at Transurban, the impact of the strong dollar was singled out by WorleyParsons, the contractor, Hastie Group, the refrigeration and air conditioning group, and surfwear giant Billabong.
WorleyParsons shareholders received quite dramatic news that the stronger dollar could cut $35 million to $40 million from the group’s 2009-10 profit.
The news pushed WorleyParsons shares down 8%, or $2.32 to $26.68, as investors reacted negatively to the news.
Chairman Ron McNeilly told the meeting that the higher currency had already pushed the group’s first half performance below expectations.
"We expect this trend to continue in the second quarter,’’ Mr McNeilly told the AGM in Sydney.
‘‘We are projecting a more significant weighting of earnings to the second half of the financial year, but with our first half year result predicted to be well below that of the corresponding period last year.
"If today’s currency rates … were to reflect the average translation rate of foreign currency earnings for the remainder of the financial year, the expected net profit impact for the full year would be in the order of $35 to $40 million.
"This impact would be additional to the modest reduction in net profit predicted in our August outlook statement.’’
WorleyParsons said in August that uncertain market conditions made it unlikely it would repeat its 2008-09 performance – when net profit rose 13.6% to $390.5 million.
However, Mr McNeilly said the company was confident that its medium and long-term prospects remained strong "based on our competitive position and our financial capacity’’, which positioned it "to pursue growth opportunities that may arise’’.
The company had cash and cash equivalents of $173.8 million, current liabilities of $1.01 billion, and debt facilities of $1.376 billion at the end of June.
"The company continues to evaluate opportunities for new business growth that would add to our existing capabilities,’’ Mr McNeilly said.
CEO John Grill said the company had "proven extremely resilient through this tumultuous economic climate’’, was currently involved in numerous multi-billion dollar projects and was "well positioned for long-term growth’’.
"We are also actively tracking a large number of potential new mega-projects and anticipate a significant pool of new work will be released as the global economy recovers translating into new capital investments in our markets,’’ Mr Grill said.
"While the rate of new project development is likely to be subdued in 2010, early phase study and feasibility work should position WorleyParsons strongly when these projects recommence.’’
Billabong International says it’s looking to a second half rebound to lift full year profit after tax.
Shareholders were told at yesterday’s AGM that the second half rebound is expected from the impact of cost cutting and stronger foreign currency hedge rates.
The surfwear retailer said the group was reaffirming prior guidance.
"Of five per cent net profit growth in constant currency terms for the 2009-10 financial year, when excluding the prior year’s impairment charge, or 10 per cent when including the impairment charge," Billabong said.
Billabong said earlier guidance of 5% net profit guidance in constant currency terms translated to flat net profit growth on currency assumptions in August of an Australian/US dollar exchange rate of 83 US cents and an Australian dollar/Euro exchange rate of 58 euro cents.
But given currency volatility and higher spot rates reported, net profit was now likely to be down on the prior year when excluding the prior year’s impairment charge, Billabong shareholders heard.
(Each one cent movement in the average monthly Australian/US dollar exchange rate for the remaining eight months of the year above or below 92 US cents would move reported net profit by about $500,000, the company said.)
(For each one cent movement in the average monthly Australian dollar/Euro exchange rate for the rest of the year above or below 61 euro cents will move the profit by about $1 million.)
"It’s important to note there are a number of factors that are expected to affect the Group’s first half year reported results, CEO, Derek O’Neill told shareholders.
"These include the first three months of the prior half year pre-dating the adverse impact of the global financial crisis, a foreign exchange gain of approximately $5 million being included in the prior half year, combined with lower foreign currency hedge rates for product purchases in Australia and Europe and the benefit of an extra three months trading results for the DaKine acquisition in the current half year.
"Combined, these factors are expected to contribute to the first half year NPAT result being down approximately 10% in constant currency terms when excluding the prior year’s impairment charge.
"The Group is forecasting a strong second half year NPAT result in constant currency terms, reflecting among other factors the benefit from various cost reduction programs as well as stronger foreign currency hedge rates for product purchases in Australia and Europe.
"The Group is reaffirming its previousl
