Take the day before a national holiday, add some floods and wet weather, higher interest rates, consumer caution, the stronger dollar and a few other factors and what do we get?
Why, a string of earnings downgrades or accounting house-keeping on what could be called ‘Confession Tuesday’.
So a day after Woolworths started the latest round of downgrades by halving expected profit growth for the 2011 financial year, the likes of Mirvac, GWA, Virgin Blue and Newcrest Mining all told the market that previous guidance was inoperative and lower forecasts were now in place.
So Mirvac revealed $215 million in asset impairments on property inventories (especially in regional areas like Newcastle and WA) because of slow sales and an oversupply of property.
While Mirvac said the write-down would have no impact on earnings, the shares dropped as much as 4.5 cents, or 3.5%, to $1.245, its biggest intra-day fall in almost three months, before closing down 3c at $1.26.
Mirvac said select regional markets had not recovered in line with metropolitan markets, with slower than expected sales in the traditionally strong spring and summer periods.
That had prompted the company to reassess the carrying values of its inventories.
"Mirvac has taken a proactive decision to dispose of zero margin projects in poor performing regional markets, which will allow us to release capital for investment into profitable residential development opportunities," chief executive Nick Collishaw said in a statement on Tuesday.
Mirvac reaffirmed its 2010/11 earnings guidance of 10.2 to 10.6 cents per stapled security and distribution guidance of eight to nine cents per security.
Mirvac also said the Brisbane floods were having a limited impact on its residential projects.
And Newcrest Mining has narrowed its full-year gold production guidance, which has had the impact of a small cut.
The new range is smaller than previously stated and it also cut its estimated copper output, blaming African politics and wet weather in Australia.
Newcrest said 2010-11 gold production was now likely to be between 2.85 million and 2.95 million ounces, compared with the previous guidance of 2.85 million to 3 million.
The market ignored the trims and the shares rose 1.6% or 59c to $37.62.
Copper production guidance now was forecast between 75,000 tonnes and 80,000 tonnes, down from earlier expectations of 80,000 tonnes to 86,000 tonnes.
Newcrest’s West African operations at Bonikro in Cote d’Ivoire have been suspended since last month, leading to a production cut of 7,000 ounces in the December quarter.
The company said the suspension was a precaution against the nation’s worsening political situation following elections. Newcrest said the shutdown was costing 8,000 ounces of gold for each month the plant remained out of action.
It said it expects Bonikro to resume processing next month, with mining to recommence shortly after.
In Australia, the wet weather in southeastern Australia has also hit some of the company’s operations, which slashed a further 21,000 ounces from forecast December quarter production.
Mines affected included Cadia Hill in NSW, which had production 18,000 ounces lower than forecast, and Cracow and Mt Rawdon in Queensland, which lost 3,000 ounces.
And the slowing of access to high grade ore at Cadia Hill is expected to further cut production by an extra 16,000 to 20,000 ounces.
Newcrest said that despite these problems, overall overall gold production rose 7.2% three months to December 31, to 722,783 ounces, compared to the prior three months.
Compared to the corresponding period in 2009, before Newcrest’s takeover of Lihir Gold, production was up 63%.
All sites except Mt Rawdon had higher production.
Copper production for the three months to December 2010 was 17,712 tonnes, down 25.8% on the equivalent period of 2009, but in line with the 2010 September quarter output.
GWA, the Brisbane-based homewares, fixtures and fittings company, has stuck to annual earnings guidance despite floods in Brisbane putting a dampener on first half sales.
GWA aid trading earnings before interest and tax for the six months to December 31 would be consistent with its full year trading EBIT guidance of $105 million to $108m.
An acquisition helped first-half sales rise 12% but they were up a slower-than-expected 4% on a like-for-like basis, which the company pinned on a decline in December due to the wet weather in Queensland, NSW and Victoria in the first half.
GWA directors said that while none of the company’s operations were directly impacted by the severe flooding, they were expecting sales to fall in the March quarter and then rebound later in the year.
"However, the company expects to benefit as reconstruction and replacement programs gather pace," it said.
GWA said it will have a better idea of the impact of the floods on its business when it releases first half earnings on February 15.
And Virgin Blue surprised with a larger than expected earnings downgrade.
On top of the already noted impact of the reservations system problems in late 2010, the airline said the impact of the floods in Queensland and slower consumer spending would see half-year net profit fall to the range of $23
