Qantas net profit down 72%, Shares slide: Economy Roundup

Qantas has recorded a 72% drop in net profit for the first half of the current financial year, saying although signs of improvement are evident, the economic outlook for the industry remains uncertain.

The company recorded a net profit of just $58 million for the six months ending December 31, compared to the $210 million during the previous corresponding period in 2008.

Additionally, underlying profit before tax increased to $267 million, with revenue reaching $6.9 billion. The company forecast a full year underlying profit before tax of between $300-400 million.

“Our two-brand strategy, focused on growing the full service, premium Qantas and low fares Jetstar, is not only delivering benefits to our customers, but also to our shareholders,” chief executive Alan Joyce said in a statement.

“Qantas, in particular, has benefited from the capacity reductions and restructuring activities implemented since April 2009, with substantial cost savings achieved during the current half year… Jetstar continues to provide the Group with true diversity, and our broader portfolio of assets with a unique strength and range of revenue growth opportunities,” he said.

Meanwhile, Reserve Bank of Australia assistant governor Philip Lowe has said in a speech the board expects Australia’s GDP to grow by between 3.25-3.5% this year.

“This is slightly above the average of the past two decades and, if it occurred, would likely see a gradual reduction in the spare capacity that currently exists,” he said. However, he also added that Australians are still cautious with their discretionary spending following the financial crisis.

“It appears that one legacy of the global downturn is that many people, despite being generally confident about the future, are taking a more conservative approach to their spending.”

He also added that recent actions taken by the Chinese Government to slow lending would not necessarily have an impact on GDP.

“On balance, it is plausible to argue that the recent tightening in credit conditions is a favourable development in that it increases the likelihood that the Chinese economy is on a sustainable path.

Shares fall despite Wall Street rally

The Australian sharemarket has opened flat today despite leads on Wall Street where investors were encouraged by optimistic housing data.

The benchmark S&P/ASX200 index was down 33 points or 0.72% to 4634.3 at 12.10 AEST, while the Australian dollar also moved slightly downwards to US89c.

Commonwealth Bank shares fell 0.5% to $52.92, while NAB shares rose by 0.1% to $25.94. ANZ declined 0.3% to $22.01 as Westpac lost 0.2% to $25.37.

AMP has said AXA Asia Pacific Holdings still remains attractive and that it has no more to say regarding its bid, after it posted a 27% increase in full year profit to $739 million for the 12 months to December 31.

Net profit was $740 million, with underlying profit down 5% to $772 million on revenue of $10.91 billion.

“Industry consolidation also gathered pace in 2009 and we expect the shape of the competitive landscape to continue to shift,” chief executive Craig Dunn said in a statement. “AXA remains strategically attractive to us. We are continuing to consider our position and will do what is in the best interests of shareholders.”

“The more the circumstances continue to change, the more the time moves on, the more flexibility we have on the bid,” he said in a results briefing.

Country Road posts 12% fall in profit

Clothing retail group Country Road has recorded a 12% decline in half-year profit to $9 million due to increased competition.

“We have been pleased with our top line growth in all channels despite the challenging trading conditions and understand the short-term decline in our bottom line is largely attributable to the start up costs of our new brand Trenery,” acting chief executive officer Glenn Gilzean said.

“We have continued to grow our stores opening 10 new stores in the half, four Country Road and six Trenery, as well as significantly expanding three existing Country Road stores.”

Santos has recorded a 74% drop in full year net profit to $434 million for the 12 months ending December 31, with underlying net profit at $257 million. Chief executive David Knox said in a statement the results were due to lower prices, but that the company is focused on being well positioned for the next year.

“Our focus remains on advancing GLNG to a final investment decision and delivering safe and profitable production from our base businesses in Australia and Asia,” he said.

Overseas, stocks rose on Wall Street due to better than expected housing data. Figures from the Commerce Department revealed housing starts rose to a six month high in January, with groundbreaking activity increasing by 2.8% to an annual rate of 591,000 units.

The figures boosted confidence on Wall Street, where the Dow Jones Industrial Average gained 40.36 points or 0.39% to 10,309.17.