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Delayed Australian Stock Exchange  -  02:10 2022-08-16 am EDT
2.730 AUD    0.00%
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Australia's bumper earnings get Delta reality check

09/03/2021 | 06:18am EDT

* Record A$38 bln dividends declared in FY21 reporting season

* Companies shy about outlook due to pandemic uncertainty

* Sell-side analysts lower FY22 earnings and dividend forecasts

SYDNEY, Sept 3 (Reuters) - An Australian earnings season bonanza for shareholders has masked a more uncertain outlook for the corporate sector as the Delta COVID variant threatens to tip an economy that was surging only months ago back into its second recession in as many years.

Australian-listed companies delivered a record A$38 billion ($28 billion) in promised dividends to investors in the season that ended this week, driven by banks and mining companies.

However, when it came to the corporate outlook, companies had much less cheer to offer.

"Companies really pulled back on giving outlook statements given the uncertainties," said Brad Potter, the head of Australian Equities at Tyndall Asset Management.

"I think the resilience of the economy has been amazing but given the situation that we're in, I don't think anyone is particularly bullish."

Earnings reported by Australia's top 200 companies in August for the 2021 year came in slightly above expectations, Eikon data shows, even as COVID-19 threw most of the country into lockdown.

However, with the Delta variant and declines in commodity prices from record highs threatening to tip the economy into a recession, buy-side analysts and investors have downgraded earnings and dividend forecasts.

Following a whopping 37% increase in aggregate reported earnings by the 156 companies covered by Citigroup in fiscal 2021, the broker cut its forecast for fiscal 2022 by 2.9% to A$124 billion.

That included a cut of about 5% for the banking sector, due to soft core earnings prospects and about 4% for mining companies, driven by sharp falls in iron ore prices.

Dividend consensus expectations for the year also fell by about 3.1%, according to JPMorgan.

"It does seem that the upward revision momentum in the near term has slowed down," Credit Suisse portfolio manager Mike Jenneke said.

That would still leave a very robust expectation of 16% growth in earnings by Citi this fiscal year, as vaccination rates amongst 25 million Australians increase, and pent-up demand drives an earnings rebound in the second half, particularly in the financials, materials and consumer discretionary sectors.

By comparison, Reuters data showed profits at U.S. firms are estimated to decline 7.2% in the third quarter, after rising 12.4% in the second quarter.

On a calendar year basis, global earnings are expected to grow 8% in 2022, after a 46% jump in 2021, according to Credit Suisse.

In Australia, over A$18 billion worth of share buybacks have been announced on top of the 80% jump in dividends declared during the reporting season, while record M&A is expected to deliver an extra windfall.

"There's a whole lot of cash that is going to be hitting investor's bank accounts over the next few months from those dividends," said Hugh Dive, Atlas Funds Management Chief Investment Officer.

"Looking ahead is a bit uncertain, even for the companies that have done very well and are tracking very strong numbers, it's going to be difficult for them to keep going."

Diagnostics firm Sonic Healthcare, whose profit more than doubled to A$1.3 billion, declined to provide earnings guidance saying the pandemic had the "potential to cause fluctuations in both COVID-19 testing revenues and the base business".

Others withholding explicit earnings guidance included hospital owner Ramsay Healthcare, retailer Coles Group and waste management firm Cleanaway Waste Management .

($1 = 1.3541 Australian dollars)

(Reporting by Paulina Duran in Sydney; Additional reporting by Gaurav Dogra; Editing by Sam Holmes)

© Reuters 2021
Stocks mentioned in the article
ChangeLast1st jan.
CITIGROUP INC. 0.41% 54.315 Delayed Quote.-10.47%
CLEANAWAY COMPANY LIMITED -0.28% 178.5 End-of-day quote.-23.55%
CLEANAWAY WASTE MANAGEMENT LIMITED 0.00% 2.73 Delayed Quote.-12.78%
COLES GROUP LIMITED 1.12% 18.97 Delayed Quote.5.74%
CREDIT SUISSE GROUP AG 0.11% 5.426 Delayed Quote.-38.91%
RAMSAY HEALTH CARE LIMITED 1.97% 72.98 Delayed Quote.0.10%
SONIC HEALTHCARE LIMITED 1.78% 34.24 Delayed Quote.-27.86%
WASTE MANAGEMENT 1.02% 174.36 Delayed Quote.3.48%
08/08Cleanaway Reportedly May Be on Macquarie's To-Buy List
08/02Cleanaway Waste Management Limited Announces Appointment of Jackie Mcarthur as Non Exec..
07/26CLEANAWAY WASTE MANAGEMENT : Application for quotation of securities - CWY
06/14High Growth To Be High Cost For Cleanaway
06/09Fire at Cleanaway Waste's Victoria Facility Disrupts Health Services Operations
06/08Cleanaway Waste Management Limited Announces Disruption to Health Services Operations i..
06/07Australian shares rise as miners, energy stocks boost
06/06Cleanaway Waste Management Seeks Acquisitions
06/06TRANSCRIPT : Cleanaway Waste Management Limited - Special Call
04/21CLEANAWAY WASTE MANAGEMENT : Ceasing to be a substantial holder from CGF
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Sales 2022 2 765 M 1 946 M 1 946 M
Net income 2022 111 M 78,1 M 78,1 M
Net Debt 2022 1 596 M 1 123 M 1 123 M
P/E ratio 2022 54,6x
Yield 2022 1,68%
Capitalization 5 631 M 3 963 M 3 963 M
EV / Sales 2022 2,61x
EV / Sales 2023 2,37x
Nbr of Employees 6 000
Free-Float 99,5%
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