Not the best of weeks ahead to be producing profits anywhere, especially in the nervy Australian markets.
While the Australian June 30 reporting season hits its peak this week, investors will have more of an eye on the stockmarket crunch.
Our market will plunge into correction territory today if the 2% plus fall tipped in the futures market is sustained by the close of trade after Friday night’s rout on Wall Street, in Europe and on Asian markets.
Our market fell 1.4% on Friday and 1.2% on Thursday and looks like doubling the size of the former, judging by the way Wall Street slid across the board.
It lost 2.7% last week, which was a smaller loss than seen in the US, Europe, China and the rest of Asia.
Already jittery local investors have punished companies reporting weak results or less than convincing guidance for the new year or the rest of the year (if they are December 31 balancing companies).
Origin, Downer, Seek, the ANZ Bank, Santos and Qantas have all felt the lash of nervy investors upset at the results falling short, or the outlook and future guidance being less than wanted.
This week will see this volatility intensify thanks to the market sell off which looks like battering the market for a while yet.
There are in fact a number of companies that are likely to see a sell off if they produce weak figures – Woolworths on Friday is the prime example, but also watch Lend Lease, BlueScope Steel and Fortescue today, BHP Billiton, Beach Energy and Oil Search tomorrow, Drillsearch and WorleyParsons on Wednesday, Nine Entertainment, Borla and Flight Centre on Thursday and Harvey Norman on Friday.
Analysts at Comsec say “it is clear that the economy was in something of a holding pattern” over the past year. Both "revenue and expenses of Australia’s largest companies grew by around 3 per cent with profits flat."
"Companies have still been keen to lift dividends, cutting high cash levels to do so. In aggregate, dividends rose around 8 per cent with a number of special dividends being paid.”
The major companies reporting this week will include:
Today: Lend Lease, UGL, Beach Energy, Spark Infrastructure, nib Holdings, AWE Limited, Fortescue, APN Property and BlueScope Steel.
Tomorrow: BHP Billiton, Amcor, Oil Search, Ingenia, Independence Group, Scentre Group and Healthscope.
Wednesday: amongst those scheduled to issue their profit results are BC Iron, Drillsearch Energy, Charter Hall, NEXTDC, APA Group, WorleyParsons and Prime Media.
Thursday: earnings are expected from Horizon Oil, Flight Centre, Perpetual, Ramsay Health Care, Nine Entertainment, Southern Cross Media, Evolution Mining, Boral, Westfield, Cromwell Property and Kingsgate Consolidated.
Friday: results including Northern Star Resources, Woolworths, Sandfire Resources and Harvey Norman.
The AMP’s chief economist and strategist, Dr Shane Oliver wrote at the weekend:
"The Australian June half profit reporting season is now almost two thirds done and overall the results have been a little disappointing. 43% of results have beaten expectations and 60% have seen their profits rise from a year ago which is okay, but it’s well down on what we have been seeing in the last few reporting seasons.
"Resources companies have remained under pressure, industrial profit margins have been weaker than expected and the banks have been mixed and guidance for the current financial year has been a bit downbeat.
"As a result profits now look to have fallen by around 2% over the last financial year and expectations for the current financial year have been downgraded to around 2%. However, it’s not all doom and gloom.
"Profits are still growing outside the resources sector by around 7% with companies exposed to housing and NSW and Victoria generally doing well, the lower $A should provide and dividends are continuing to rise solidly. So there is a bit of light at the end of the tunnel,” Dr Oliver wrote.
Source: AMP Capital
Source: AMP Capital
Source: AMP Capital.
