Qantas weighed down by fuel costs while Wesfarmers surges on Coles demerger

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Updated

February 21, 2019 15:00:23

Qantas has seen its first-half profit lose altitude, weighed down by heavier fuel costs.

Key points:

  • While higher oil prices have crimped Qantas profits, producers Santos and Origin have rebounded back into the black
  • Wesfarmers shareholders have been showered with a $1.1b return from the Coles demerger
  • Falling TV advertising dragged down Nine’s profit again

Net profit for the six months to December 31 fell 16 per cent to $498 million, down from the dizzying heights of a record $595 million a year ago.

Underlying profit, stripping out one-off items, was down 18 per cent to $780 million.

Over the six months, Qantas spent $2 billion on fuel alone, a $416 million increase on the prior corresponding period.

Qantas chief executive Alan Joyce said he was pleased with the way the business had responded to the challenges it faced.

“Higher oil prices were a significant headwind and we moved quickly to recover as much of the fuel cost as we could,” Mr Joyce said.

“That’s easier to achieve in the domestic market than on long international routes where fuel is a much larger factor.”

The domestic business recorded a record first-half profit, up 1 per cent, to $659 million.

Despite a 7 per cent increase in revenue, the international wing recorded a 60 per cent slump in earnings (before interest and tax) to $90 million, largely due to a $219 million increase in its fuel bill.

Qantas continued its recent trend of showering investors with capital returns, handing back another $500 million — made up of a 12 cent interim dividend (up from 7 cents) and $305 million share buyback.

It also gave a fairly upbeat forward guidance, forecasting solid revenue growth and a diminishing headwind from fuel costs.

Qantas shares were up 1.9 per cent to $5.77 at 3pm (AEDT).

Wesfarmers’ record profit

Perth-based conglomerate Wesfarmers has posted a record first-half profit of $4.5 billion thanks to its massive slimming down operation.

The bulk of the windfall — $3 billion — came via the demerger of the Coles supermarket chain late last year, with the sale of the Kmart auto servicing business, Quadrant Energy and a stake in the Bengalla coal mine also filling up the coffers.

First-half net profit on continuing operations rose a solid 10.4 per cent to $1 billion.

The slimming down of Wesfarmers fattened returns to shareholders, with $1.1 billion being returned, mainly in the form a special $1 dividend.

Armed with a bulked up balance sheet, Wesfarmers said it was now well positioned and looking for growth opportunities that may arise — at the right price.

Investors liked the news, driving the shares up 7 per cent to $35.04 at 3pm (AEDT).

Nine slips

Tough times in the TV advertising market have again taken their toll on Nine Entertainment.

First-half profit slipped 1 per cent to $172 million.

The culprit was a 3 per cent slide in sales revenue to $1.2 billion over the half, despite Nine increasing its share of the free-to-air market.

However, Nine said its second half should be better, forecasting a 10 per cent increase in pre-tax earnings this year.

Nine is pinning its hopes on a turnaround in sales being delivered by the usual bombardment of ads from political parties in the lead up to this year’s federal election.

It is also looking to trim more costs from its TV and publishing businesses, and make efficiency gains from its recent acquisition of Fairfax Media.

The positive outlook gave investors some heart with shares bouncing 5.5 per cent to $1.55 at 3pm (AEDT).

Santos and Origin back in the black

While Qantas was bemoaning the surging oil price, back at the well-head producers Santos and Origin Energy are loving it.

Santos rebounded from last year’s $500 million loss with a full-year net profit of $880 million.

Its underlying earnings more than doubled to a record $1 billion, well ahead of market expectations.

It full-year dividend of 9.7 US cents per share (13.5 cents) also beat expectations.

Its reserves and future production also received a substantial boost with the purchase of Wesfarmers’ Quadrant Energy business during the year.

LNG-focussed Origin Energy also bounced back, turning last’s first half $207 million write-down hit loss into a $796 million profit.

The underlying first-half profit jumped more than 50 per cent to almost $600 million.

However, the power generation and retailing side of the business was less impressive, with a “modest” 2 per cent growth in earnings held down by greater competition in the sector and “price relief” for customers.

The big winner out of the results were Origin’s long-suffering investors who finally saw a dividend — 10 cents per share for the first half — after prolonged drought of capital returns.

The return to profitability was welcome, with Santos and Origin up 0.3 per cent and 1 per cent respectively at 3pm (AEDT).

Topics:

air-transport,

company-news,

australia

First posted

February 21, 2019 09:04:48



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