Aus­tralian com­pany prof­its surge 18.9pc

The Pak Banker - - Company+Boss News -

SYD­NEY: Aus­tralian busi­ness prof­its ad­vanced in the three months through June by more than three times the amount es­ti­mated by econ­o­mists as earn­ings surged at min­ing com­pa­nies, builders and banks.

Gross op­er­at­ing prof­its rose 18.9 per­cent in the sec­ond quar­ter from the pre­vi­ous three months, when they climbed a re­vised 4.3 per­cent, the Bureau of Statis­tics said in Syd­ney to­day. The me­dian es­ti­mate of 19 econ­o­mists sur­veyed by Bloomberg News was for a 5.8 per­cent gain.

The biggest jump in com­pany prof­its in nine years adds to ev­i­dence of re­silience in Aus­tralia's econ­omy, which is fore­cast to ac­cel­er­ate next year as firms led by re­sources com­pa­nies such as BHP Bil­li­ton Ltd. boost in­vest­ment to meet China's de­mand for iron ore and en­ergy. A sep­a­rate re­port to be pub­lished this week will show the econ­omy grew for a sixth straight quar­ter, ac­cord­ing to a Bloomberg News sur­vey.

"Aus­tralia is en­joy­ing a size­able boost to na­tional in­come from a sharp rise" in earn­ings from coal and iron ore ex­ports, said Bill Evans, chief econ­o­mist at West­pac Bank­ing Corp. in Syd­ney. "Min­ers, re­spond­ing to the high level of com­mod­ity prices, plan to sharply boost in­vest­ment" in the 12 months through June 30, 2011, he said.

The Aus­tralian dol­lar was at 90.18 U.S. cents at 12:20 p.m. in Syd­ney, and ear­lier reached 90.32 cents, the strong­est since Aug. 18. The two-year govern­ment bond yield gained 0.01 per­cent­age point to 4.37 per­cent.

Prof­its at min­ing com­pa­nies surged 62.7 per­cent in the sec­ond quar­ter, builders ad­vanced 30.5 per­cent and banks and in­sur­ers climbed 28.9 per­cent, to­day's re­port showed. Prof­its ad­vanced 27.5 per­cent in the sec­ond quar­ter from a year ear­lier.

Aus­tralia's four largest len­ders, Com­mon­wealth Bank of Aus­tralia, West­pac Bank­ing Corp., Aus­tralia & New Zealand Bank­ing Group Ltd. and Na­tional Aus­tralia Bank Ltd., this month re­ported in­creased earn­ings af­ter stem­ming losses from loans af­ter the fi­nan­cial cri­sis.

Mel­bourne-based BHP re­ported last week a dou­bling in profit to $6.59 bil­lion for the six months ended June 30 af­ter earn­ings at the met­als unit of the world's largest min­ing com­pany jumped more than three­fold in the full year.

Wool­worths Ltd., Aus­tralia's biggest re­tailer, fore­cast on Aug. 26 that earn­ings will rise as much as 11 per­cent and an­nounced it would buy back A$700 mil­lion ($631 mil­lion) of shares, more than dou­ble the amount pur­chased ear­lier this year.

Ro­bust com­pany earn­ings were among rea­sons cen­tral bank pol­icy mak­ers led by Gover­nor Glenn Stevens raised bor­row­ing costs six times from Oc­to­ber to May, the most ag­gres­sive round of mon­e­tary pol­icy tight­en­ing by a Group of 20 mem­ber.

Stevens left the bench­mark overnight cash rate tar­get at 4.5 per­cent on Aug. 3 for a third straight month, cit­ing con­cerns that the world's largest economies, in­clud­ing the U.S. and Europe, may be slow­ing.

U.S. hir­ing and man­u­fac­tur­ing prob­a­bly cooled in Au­gust, in­di­cat­ing com­pa­nies are scal­ing back as that nation's re­cov­ery shows signs of stum­bling, an­a­lysts said be­fore re­ports this week. Pri­vate pay­rolls that ex­clude govern­ment agen­cies rose by 47,000 this month af­ter a 71,000 gain in July, while the un­em­ploy­ment rate rose to 9.6 per­cent, ac­cord­ing to the me­dian es­ti­mates econ­o­mists sur­veyed by Bloomberg News. Fac­to­ries ex­panded at the weak­est pace in al­most a year, an In­sti­tute for Sup­ply Man­age­ment re­port is fore­cast to show. Aus­tralian sales of newly built dwellings de­clined 7 per­cent in July from June, the Can­berra-based Hous­ing In­dus­try As­so­ci­a­tion said in a re­port e-mailed to Bloomberg News to­day.

Still, the ex­pan­sion in Aus­tralia's econ­omy, now in its 20th year, will boost in­fla­tion pres­sures in com­ing years, cen­tral bank Deputy Gover­nor Ric Bat­tellino said this month.

"His­tory tells us that in­fla­tion can be a prob­lem dur­ing re­sources booms, and while there are grounds for think­ing it will be less of a prob­lem this time than in the past, we need to re­main alert to the risks," Bat­tellino said Aug. 20.

Aus­tralian com­pa­nies fore­cast in­vest­ment of A$123.3 bil­lion in the year end­ing June 30, 2011, which is 17.5 per­cent more than they es­ti­mated three months ear­lier and 24.3 per­cent more than the cor­re­spond­ing fore­cast last year, a re­port showed last week. All 23 econ­o­mists sur­veyed by Bloomberg News late last week pre­dict pol­icy mak­ers will keep the bench­mark rate un­changed on Sept. 7. In­ven­to­ries held by com­pa­nies fell 0.5 per­cent. Econ­o­mists fore­cast a 0.4 per­cent in­crease.

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

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