The December half profit reporting season finished Friday, except for some stragglers today and tomorrow like transport group, Asciano which is out today and could see the debt-ladened stock become the latest fancy of hedge funds and other speculators looking for a quick profit.
Asciano will be reporting into a market that is likely to fall sharply after Wall Street had its second biggest fall of the year so far Friday night: down 315 points on the Dow.
That also saw the Australian dollar drop 1.5 US cents as it plunged to close at 93.08 US cents from 94.66 in Sydney on Friday afternoon.
Asciano got approval from ASIC early last month to report late: it had been expected to report two weeks ago but was allowed to lodge its information with the ASX by late Friday (the last day for December interim reporting companies) for release first thing today, along with all presentation material.
Its share fell 12c Friday to $4.97, just above the all time low of $4.85 reached in January. Its shares have more than halved from the high of $11.64 in late June which was reached after its spin-off from Toll Holdings in the wake of the Patrick takeover.
Asciano tried to stalk the much larger Brambles, with Toll running a low key game of buying into Brambles and seeing what would happen. Toll and Asciano have been barred from acting in concert in any deal in this country by the ACCC in the wake of the Patrick acquisition.
It has now cut its Brambles stake to 3.44% from 4.09% and claims to have covered all its holding costs until last Friday, February 29. It also claimed in December that it expected to have over $700 million in cash by the end of 2007, had hedged 60% of debt and only had $285 million in mostly working capital related debt falling due this year.
But that move on Brambles came as credit markets closed and the cost of debt soared and banks stopped lending, leaving AIO with high priced shares and huge debts of its own from the split with Toll: AIO spent around half a billion dollars or more on its Brambles adventure, on top of all the debt taken on from the ports and rail transport businesses of Toll and Patrick.
It has been on the list of highly leveraged companies whose shares have been sold off and there has been considerable speculation what its delayed interim figures will reveal today.
Another one to watch will be Gold Coast property and financial services group, City Pacific which reported late on Friday evening. That was in fact a new version of the interim accounts (unaudited) lodged on February 21.
It claimed to report a profit for the half year but deconsolidated two key property trusts that seem to need a lot of money repaid by the end of May: around $240 million.
City Pacific dropped an attempt to buy some of the financial services assets of MFS last week and it wouldn’t surprise if the latest result causes second thoughts about the Gold Coast group, which has already been on many lists of leveraged and property related stocks to watch.
Overall the interim (and scattered 2007 full year) reporting season is now largely wrapped up with good results over the past week from companies such as Dyno Nobel, Woolworths, Aristocrat, Harvey Norman and Origin Energy.
The AMP’s Dr Shane Oliver says that overall the results have been solid but profit growth has been well down on recent years.
"Of the 166 major companies to have reported, 38% of results have come in better than expected versus an average of 52% over the last eight reporting seasons, and 33% of companies have surprised on the downside versus an average of 21% over the last eight reporting seasons," said in his weekly note late Friday.
"Key themes overall have been much slower growth in the resources sector, difficult conditions in the insurance and property sectors, still solid domestic demand, increasing cost pressures (in terms of wages, raw materials and interest costs), tougher conditions for the banks on the back of higher funding costs and increasing provisions for loan losses, and tough conditions for US exposed companies.
"Outlook statements have also been a lot more cautious with concerns about costs and slowing demand.
"The ratio of companies with positive to negative outlook comments has come in around 1.4 to 1, versus 12 to 1 in the August reporting season last year.
"Profit growth for the year to the December half looks to have come in around 7% which is well down in on the 19% growth reported a year ago. Analyst earnings growth expectations for the next year have also been revised down by 1% or so.
"However, while profit growth has slowed it is still positive and should help provide a solid underpinning for the share market on a 6-12 month view,” he said.
The Australian market fell by around 1.4% last month and that was mostly accounted for by Friday’s fall of a similar size. The All Ords down 1.24% on the day, but up 0.54% for the week and down on the month at 5644.50 on Friday. The ASX 200 finished at 5572.1 for a similar performance over the week and over the month.
Today though will see the loss built on and it won’t be a great start to March, especially with another interest rate rise out of the Reserve Bank tomorrow and more economic figures with bad good news: i.e. the economy still growing strongly, according to Wednesday’s National Accounts for the December quarter.
The US will still be a major influence with the February jobless figures on Friday keenly awaited to see is the unemployment rate jumps again as the US economy continues to slide south.
US stocks fell last week, making February the fourth monthly decline in a row.
In heavy trading Friday, the Dow dropped 315.79 points, or 2.51% to 12,266.39. The Standard & Poor’s 500 Index lost 36.96 points or 2.70% to 1,330.72 while the Nasdaq Composite Index shed 60.09 poi
