Soul Patts Ups Guidance Ahead of Milton Vote

Investors didn’t applaud the earnings upgrade from investment group Washington H. Soul Pattinson on Monday, sending the shares down 3% at one stage despite the solid upgrade to its 2020-21 earning guidance.

The shares dipped to a day’s low of $34.20 and then bounced to close at $35.36 for a loss of 1.75% on the day.

Soul Patts told the ASX on Monday that its part owned coal miner and exporter, New Hope had recently disclosed expectations of earnings before interest, tax, depreciation and amortisation (EBITDA) in the range of $372 million for 2020-21 thanks to thermal coal prices reaching 10-year highs of around $US170 a tonne, despite the Chinese ban on coal imports from Australia.

As well, its long-time part owned associate, Brickworks has upgraded its forecasts for 2020-21 earnings, thanks to a stellar result from its property division, although its core brick making business has been hit by the Covid lockdowns in NSW.

Miner Round Oak, another part owned associate says it is expecting a net profit in the range of $64 million to $68 million for the year, which will be a significant improvement on 2020’s loss of $43 million as commodity prices like zinc and copper improve and the miner moves into production.

As a result Soul Patts says it is looking net profit for the year ending July 31 – which represents earnings from its ongoing businesses less one-off items – to be between $316 million and $336 million compared to $170 million for last financial year.

Even though analysts have already anticipated the upgraded earnings guidance, not many small investors would have appreciated the size of the expected rise in net profit – more than 80%. The shares are up 20% year to date.

Statutory profit though will be “materially lower” for 2020-21 than 2019-20, which including a one-off accounting gain of $1.05 billion from the TPG and Vodafone merger.

Soul Patts trading update came a week before a vote on its merger with fellow Sydney investor, Milton Corp (The two companies are shareholders in each other and have common directors)

Shareholders will vote virtually on the Milton merger on September 13, and Soul Patts said its 2020-21 results and dividend are due for release 10 days later. Brickworks will report on the same day.


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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