Conclusions from the 2013 reporting season – CommSec Securities

Commsec Economists Craig James, and Savanth Sebastian on September 2, 2013 released a review of corporate profits from the reporting season which concluded at the end of August. Their title printed in Economic Insights is “Tough times, but still making money”

The gathering of adequate data, and its analysis to form an impression of overall corporate performance, is a formidable task. Commsec securities Research assessed the results of 143 companies reporting FY earnings to June 2013, and 26 companies reporting half-year results. Heavy weight stocks BHP and CBA were excluded.

The results are a significant indicator of economic activity. They merit attention. With CommSec’s indulgence I have attempted a limited and necessarily selective, quotation of  items of importance.

  • Aggregate Company profits were up 17% in 1H 2013, but only about 5% (estimate) for FY 2013.
  • Of 143 companies reporting FY results, revenue grew by an aggregate 3.4% to $582.2 billion,
  • while expenses grew 2.9% to $461.4 billion, resulting in net profit of $44.1 billion, a fall of 5.9%
  • Average EPS fell by 14.1%
  • Cash holdings fell 3.6% to $76.4 billion (approx 1.7 times profits)
  • Dividends fell 2.5%.

From the perspective of the range of corporate profit results:

  • 119 of 143 companies, (83.2%), produced a profit
  • 87 of the profitable companies (60.8%) recorded an improvement in profit.
  • Of the 26 companies presenting half-year results all but 5 (81%) were profitable, but in aggregate profits were $6.9 billion , down 37.5%
  • Aggregate sales rose 2.3% to $79 billion, whilst cost rose only 0.2% higher a $58.7 billion.
  • EPS rose 0.3%, while dividends and cash holdings were higher. Dividends up 8.5% in aggregate.

Conclusions

Over 80% of companies were profitable over the reporting season, and a majority increased their profit (61%) of those reporting full year results. But in comparison of some metrics with the previous reporting season, the results are mixed. There is little clear-cut improvement. Trading conditions for many companies have been difficult.

From personal knowledge there are a number of companies that are undergoing radical reconstruction of their operations. For them one-off costs, and write-downs have compromised the net profit results, but the changes are paving the way for better results to come.

Some of the companies I am familiar with include Hills Holdings, Boral, Bluescope Steel, Arrium, printing business PMP Limited, media companies Fairfax and Ten Holdings, FKP Property, Wide Bay, and Australian Agricultural. Many have reduced their debt gearing, and should have lower costs for the future.

On Dec 23 2012, it was considered that the worst of the GFC had passed, and that steady gains could be expected in 2013. At the time the ASX 200 was at 4500. The suggested target for the end of 2013 was 5400, the 61.8% Fibonacci retracement level.

Further improvement in corporate profitability expected

Further improvement in corporate profitability expected

 

Other posts:

Did Dow Get It Right Again? August 12, 2012.

Steady gains expected in 2013  December 23, 2012.



Categories: Business, Chart Analyses, Trading opinion

Tags: , , ,

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