Companies coy about year ahead

Outlook unclear despite profits

CORPORATE Australia is apprehensive about the country’s economic outlook, with only 37 per cent of companies game enough to provide performance forecasts in the latest reporting season.

About 84 per cent of ASX 200 companies delivered a profit, compared to the average since 2010 of around 88 per cent.

CommSec markets analyst Steven Daghlian described the overall result as “solid”.

“What was clear was those that were making profits were making bigger profits,” Mr Daghlian said. “About 70 per cent of companies saw improvements in their earnings.

“Dividends were bigger – close to $40bn will be paid out to shareholders in the next couple of months – and certainly mining stocks dominated as far as that goes.”

The fattest record payouts came from iron ore majors BHP, Rio Tinto and Fortescue Metals on the back of booming iron ore prices.

Along with bumper earnings being used for share buybacks, a recurring theme was companies being extremely cautious providing any form of guidance.

“They wouldn’t be super clear with their likely outcomes in coming months and the year because of the lack of visibility moving forward because of Covid … which is not really surprising,” Mr Daghlian said.

“With many companies, they may have done well over the year, but they’re not saying too much about the coming year overall.”

High on that list were retailers, who largely managed to overcome the massive impacts of lockdowns and other restrictions on their physical stores – in some cases losing hundreds of trading days – by upping their game with online, contactless delivery and click and collect.

“Companies that were well placed to service people during the pandemic did well,” Mr Daghlian said.

“So the Harvey Normans, the JB Hi-Fis of the world, they both had very strong gains and profits.”

Travel stocks held up surprisingly well as investors bet on a big recovery in tourism when it finally resumes in earnest.

Qantas shares rallied 14.4 per cent in August, while Webjet jumped 14.6 per cent and Flight Centre recovered 12.3 per cent.

“Even though they came out with big losses, there were some green shoots from some of them: Flight Centre said it had a strong recovery in the US and Canada, across Europe as well,” Mr Daghlian said.

It comes as Westpac again has lowered its Australian economic growth forecasts due to the impact of Covid-19.

The bank now sees September quarter growth of -4 per cent, and December quarter growth 1.6 per cent, down from -2.6 per cent and 2.6 per cent previously forecast.

“Our new forecasts assume that Melbourne will remain in lockdown until the end of October,” said Westpac chief economist Bill Evans.