Earnings Catchup: Newcrest, Cochlear, Domain, oOh! Media

By Glenn Dyer | More Articles by Glenn Dyer

Newcrest Mining might have ridden the rising gold price higher in the second half of 2018-10 to report a 22% jump in annual profit for the year to June, but the next year will see a sharp fall in output from its major producer, the Cadia mine in NSW of the order of 10% to 20%.

That news helped push Newcrest shares down 1.4% to $36.20, despite Comex gold futures hitting a more than six-year high on Thursday in New York of $US1,531.20.

A modest rise in copper prices, as well as strong gold and copper sales volumes from the Cadia mine in NSW, added to the rise.

Newcrest, which is Australia’s biggest listed gold miner, reported an underlying profit of $US561 million ($A828.1 million) for the year to June 30, up more than a quarter from the $US459 million in 2017-18.

That was struck on a small rise in revenue for the year to $US3.74 billion from $US3.56 billion in 2017-18.
The weaker Australian dollar helped costs which fell to a record low at Cadia.

The production fall this financial year at Cadia will be due to lower grades of ore to be mined plus a long-planned maintenance activity at one of its processing mills.

Newcrest said gold output will fall to between 760,000 ounces and 840,000 ounces for 2020, well below the 912,777 ounces produced in 2018-19.

The cut in production from Cadia mine led the company to keep its overall gold production for fiscal 2020 largely unchanged at between 2.35 million ounces to 2.50 million ounces compared with 2019.

The 2019-20 guidance includes a contribution from the 70% Red Fox mine in Canada – its purchase was settled earlier this month.

Newcrest expects the total capital expenditure for 2020 at between $US680 million and $US780 million, slightly more than what it spent in 2018-19.

For the full year, total revenue came in at $US3.74 billion, up from $US3.56 billion last year.

The Melbourne-based company declared a final dividend of 14.5 cents per share, up from 11 cents a year earlier.

That took the full-year payout to 22 US cents a share, up from 18.5 US cents in 2017-18.

Cochlear’s 2018-19 results topped market expectations but the outlook could be a bit more clouded than investors previously thought.

Cochlear had guided to a net profit of between $265 million and $275 million for the year ending June 30, but topped this with a 13% rise to $276.7 million.

This also considerably beat consensus estimates, which predicted Cochlear would come in at the low end of its guidance and would generate $267.4 million in revenue.

The company issued updated guidance for the coming year with a forecast net profit in the next financial year of between $290 million and $300 million.

Revenue by 7% to $1.4 billion, although this was only up 2% in constant currency terms.

The company declared a final dividend of $1.75, up 9%, taking the full-year payment to $3.30 a share, up 10%.

Cochlear attributed much of its solid year to the performance of its services business – which includes the Nucleus 7 Sound Processor – but experienced slow growth in its core flagship cochlear implant sales.

Cochlear said sales dropped in China and plummeted in Turkey and Argentina, with the fall in the latter two blamed on “recession and currency devaluation”, but increased in eastern Europe and the Middle East.

“After four years of strong growth driven by a combination of market growth and share gains, our developed markets units were in line with last year while emerging markets units declined,” Cochlear chief executive Dig Howitt said.

“We have a strong financial position that enables the business to fund its growth activities while rewarding shareholders along the way with a growing dividend stream,” Mr. Howitt said.

Domain, Nine Entertainment’s property listings website business, has cut the full-year dividend to 6.0 cents, fully franked, down from a partially franked 8.0 cents.

That was after a sharp fall in net profit for the year to June thanks to the big slide in house prices in the past year or so.

Domain said its underlying net profit fell 29.3% to $37.4 million in the year to June 30.

Earnings before interest, tax, depreciation, and amortisation declined 15.3% to $98 million.

Reflecting the fall in house prices and revenue fell 6.1% to $335.6 million reflecting a fall in new listings.

On a statutory basis, Domain reported a net loss in the 2019 financial year of $137.6 million after it had booked a $178.8 million non-cash goodwill write down in the December half.

Mr. Pellegrino said in a statement the company’s performance was “solid … in the context of the challenging year faced by the Australian property market,” he said.

CEO Jason Pellegrino said it was a solid performance in the context of major listing declines in Melbourne and Sydney.

Mr. Pellegrino said the market had shown encouraging signs in the first weeks of FY20, including increased attendance at open for inspections, and increased home loan application volumes.

However, the company said listings volumes remained weak in a seasonally low listings period, with national market new listings dropping 20% in July, and Sydney and Melbourne new listings down 26% and 27% respectively.

News Corp-owned rival REA Group also posted a big drop in 2018-19 profits this month, amid what News Corp said were “unprecedented market conditions”.

Out of home advertising group, oOh! Media’s 2019 profit downgrade was given the big thumbs down on Friday after it cut its profit forecasts, citing a “significant decline in overall media advertising spend” and “general economic uncertainty”.

The shares plunged more than 27% to $2.93. That took the shares down 29% last week and they are off 38% for the past year. The shares were down 40% at one stage on Friday.

oOh! warned its 2019 financial year earnings (It’s a December balancing company) will be about $27 million – down 17% – from what it had earlier forecast.

The company blamed the “current general economic uncertainty and challenging market conditions” that damaged profits and made earnings predictions “more difficult”.

oOh! runs outdoor advertising in Australia and New Zealand, including over 9000 digital signs.

It said that its previous expectation for earnings of between $152 and $162 million before income, tax, depreciation, and amortisation had now dropped to between $125 and $135 million for the year to December.

oOh!’s earnings are weighted towards the second half of the year, and to the fourth quarter in particular. But it’s the September quarter where the company’s hopes have been whacked.

The company said in its release that had suffered from a “sharp decline” in advertising bookings in the current (third) quarter of 2019, with an average drop-off of 11% to 12%

Fourth-quarter earnings are now likely to grow around 6% with 10 selling weeks remaining for the period.

Glenn Dyer

About Glenn Dyer

Glenn Dyer has been a finance journalist and TV producer for more than 40 years. He has worked at Maxwell Newton Publications, Queensland Newspapers, AAP, The Australian Financial Review, The Nine Network and Crikey.

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