Bloomberg News

Australia Company Profits, Job Ads Fall as Rate-Cut Calls Mount

June 03, 2012

Australian business profits dropped for a second consecutive quarter on weaker mining earnings and help-wanted notices fell as a growing roster of economists (INAUQOQ) predict an interest-rate cut tomorrow.

Gross operating profits in the three months through March were down 4 percent from the final quarter of last year, when they slid a revised 6.4 percent, the Bureau of Statistics said in Sydney today. The result compares with the median forecast for a 2.5 percent drop in a Bloomberg News survey of 17 economists. A private report showed job advertisements declined last month by the most since December.

Paul Bloxham, chief economist for HSBC Holdings Plc in Sydney and a former Reserve Bank of Australia official, changed his rate prediction today, joining a majority of respondents in a Bloomberg survey in forecasting Governor Glenn Stevens will lower the benchmark a quarter percentage point to 3.5 percent tomorrow. A private gauge released today of annual inflation remained below the lower end of the central bank’s 2 percent to 3 percent target range for a third straight month.

“With inflation low, the RBA will feel they can afford to take out more insurance against the possibility of a significant global downturn,” Bloxham said in a research note, adding there’s a risk the RBA could cut by half a percentage point. The central bank has “a demonstrated history of staying ahead of the game when it comes to global downside developments,” he said.

Dollar’s Decline

The Australian dollar fell against 15 of its 16 most traded peers today and bought 96.58 U.S. cents at 12:45 p.m. in Sydney. On June 1, it reached 95.82 cents, the lowest level since early October.

The nation’s unemployment rate probably rose to 5.1 percent in May from 4.9 percent, according to a Bloomberg News survey of economists before the government releases monthly employment data on June 7.

Jobs advertised in newspapers and on the Internet dropped 2.4 percent last month after a revised 0.8 percent slide in April, according to an Australia & New Zealand Banking Group Ltd. report released in Melbourne today.

Consumer prices rose 1.8 percent last month from a year earlier, matching the weakest pace in two years, after a 1.9 percent gain a month earlier, according to an index compiled by TD Securities Inc. and the Melbourne Institute released in Sydney today. Prices were unchanged in May from April, when they were up 0.3 percent.

Weaker Profits

From a year earlier, profits declined 0.5 percent, today’s report showed.

The currency gained 1.3 percent last quarter against its U.S. counterpart and has risen about 37 percent since the start of 2009.

Earnings at mining companies fell 13.3 percent in the first quarter and manufacturing declined 9.8 percent, according to today’s report. Income at financial and insurance services soared 74 percent, and accommodation and food services advanced 5.3 percent, the report showed.

Transfield Services Ltd. (TSE), an Australian engineering and maintenance company, in April cut its full-year profit forecast as much as 22 percent.

After tax earnings before amortization costs will be A$105 million ($101 million) in the 12 months ending June as floods and storms hit its mining unit and the company provides for losses on a construction contract, Sydney-based Transfield said April 3. The forecast is as much as 22 percent less than a Feb. 22 prediction for profit of A$130 million to A$135 million.

Inventories Gain

A separate report showed inventories rose 0.9 percent. Economists had forecast a 0.7 percent gain.

Harvey Norman Holdings Ltd., Australia’s largest electrical-goods retailer, said in May that nine-month earnings dropped 25 percent as a consumer slowdown curbs sales and discounting crimps profitability.

Unaudited pretax profit fell to A$204.8 million in the nine months ended March from A$272.3 million a year earlier, the Sydney-based company said in a statement on May 3. Sales in the period dropped 6.7 percent.

Myer Holdings Ltd. (MYR), Australia’s largest department-store chain, last month cut its profit forecast.

Net income may fall as much as 15 percent in the year ending July as weak consumer spending and uncertainty about the global economy cuts sales, Myer said May 23. The Melbourne-based retailer forecast March 15 that earnings would be “no worse than 10 percent” below the year-earlier profit of A$162.7 million.

Gross operating profit measures earnings before tax, interest, depreciation and amortization. It excludes asset sales and foreign-exchange gains or losses.

The RBA’s Stevens last month slashed the overnight cash rate target to a two-year low of 3.75 percent from 4.25 percent, the deepest reduction in three years, as inflation cooled and growth slowed.

To contact the reporter on this story: Michael Heath in Sydney at mheath1@bloomberg.net

To contact the editor responsible for this story: Stephanie Phang at sphang@bloomberg.net


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