Three results yesterday from Pacific Brands, Origin Energy and Fairfax Media all disappointed for one reason or another, and investors gave the trio a caning,
Fairfax Media saw its shares down 6% at one stage, despite signs of an improvement, a slightly higher dividend offset by uncertainty about the outlook because of the soft retail conditions in Australia and the unknown impact of Tuesday’s earthquake on the company’s Christchurch paper and on its NZ business generally.
Origin Energy saw its shares lose more than 5.5% as it downgraded its outlook and surprised by giving its US partner more time to pay $1 billion into their Queensland coal seam methane LNG joint venture.
And Pacific Brands, the not too successful Melbourne clothing and footwear group saw its shares shredded by around 15% after revealing a surprise impairment of assets and uncertain outlook, which offset some good news on cash flow, profits and an improved interim dividend.
The Pac Brands report will rank among the surprises of this reporting season, along with Origin’s news yesterday, the IAG update and halving of profit last week and the Downer EDI losses and mooted capital raising on its Sydney train contract.
Pac Brands shares fell 15% at one stage yesterday after it revealed the surprise $166 million loss (after the equally surprising impairment charge) and warned of the dangers of the current surge in global cotton prices to record levels.
That loss compared to a profit of $22.4 million in the prior corresponding period.
But Pac Brands lifted net profit 64% to $58 million before the writedowns which showed it was in much better condition than it was two years ago, when it announced that it would shut down seven Australian factories and shift production to Asia.
Pacific Brands will pay an interim dividend of 6c per share, up from 4c in the previous corresponding period. Sales fell 9.5% to $852 million, but excluding discontinued businesses, the fall was 2.3%.
"Challenging retail conditions and volatile import costs make it difficult to predict performance in the second half,’’ the company said in a statement and it added that underlying sales movement in the June half year is expected to be broadly in line with that of the first half of 2011, which saw a 2.3% fall.
CEO Sue Morphet said cash flow remained strong, but market conditions were challenging.
"Earnings in 2H11 are likely to be adversely impacted by soft trading conditions, import price increases (especially due to higher cotton prices which are expected to impact from 4Q11) and FOS performance. Consequently, while EBITA before significant items in 2H11 is expected to be lower than 2H10, the company remains confident that F11 EBITA before significant items will exceed the F10 full year result."
FOS is the company’s Footwear, Outerwear and Sportswear division where the impairment charge of $175 million was taken. A further charge (non-cash) of $40 million was made against the value of the Sleepmaker and foams business and there was $9.4 million in restructuring costs.
Shares in the company plummeted as much as 16.5c to a six-month low of 93.5c on the news. By late afternoon, the stock was down 12c, or 10.9%, to 98c.
ORIGIN Energy revealed a first-half loss, cut its annual earnings guidance and revealed the $US1 billion holiday for partner ConocoPhillips.
The shares finished down 57c, or 3.4%, at $15.91.
The earnings guidance reduction is due to the company’s impending share issue to help finance the acquisition of power assets in NSW.
Origin reported a $136 million net loss for the six months to December 31, compared to a $371m profit a year earlier, thanks to $440 million of one-off costs associated with the acquisition of the NSW power assets and an impairment on its investment in a geothermal energy joint venture.
Underlying profit fell to $304 million from $355 million, but that was roughly within most analysts’ forecasts.
But Origin said it expects full-year underlying profit growth of 10%-15%, down from previous guidance of 15%, with the range reflecting the timing of any equity raising.
The holiday for Conoco has added the fears among analysts and big investors that the company’s LNG joint venture is facing increasing financial and marketing strains.
Conoco has been selling assets to cut debt and some analysts reckon it’s not as committed to the Queensland LNG joint venture as it was two years ago.
Origin said yesterday that to "help progress a final investment decision in the near term", payments from ConocoPhillips due at the time of sanctioning, will now be made when the project pays out an agreed economic return.
Chief executive Grant King declined to comment under what circumstances the deferral could be activated.
If it is, Origin will have to stump up an extra $US500 million for each of the project’s two LNG processing units before being entitled to the
