Company profits remain subdued

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The latest Wren Advisers survey of company profits shows that most businesses are struggling to achieve even modest earnings growth.

Of the 143 ASX-listed companies that have reported their results in August, median sales growth is just 4.7% and net profits are 5.2% higher than last year. While those headline numbers suggest that trading conditions are tough, there are even more worrying trends in the detail.

As you can see from the charts below, earnings on a per share basis are up are a meagre 1.6% and net profit margins have slipped to 10.3% – their lowest level since December 2009.

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Although the market was well-prepared for lacklustre results, the reaction of share investors has been interesting. The percentage of stocks rallying after their profit announcement has roughly been in line with last year at 49% (50% in FY12).

But the reaction to worse-than-expected results has been harsh. Around 44% of stocks have seen their share price fall after their profit release which is up from 38% in FY12 and just 32%in FY11.

Despite the weak picture for earnings, only 18% of companies cut their dividends which is slightly fewer than last year. The average dividend yield for FY13 was 4.6%.

Comments

  1. Robert Holt says:

    This post just confirms that the economy is in lousy shape. Politicians are arguing over pointless matters while businesses go to the wall.

    It would be interesting to know what the break-up of these figures is on a resources versus industrials basis. Do you have any numbers on this?

    Thanks.

    • staff staff says:

      Hi Robert,

      Yes we do have some data on resources versus industrials earnings. The numbers show that median industrial profits are up 6.2% and resources are down 28.3%.

      This continues the trend of the last three reporting seasons with industrials showing single-digit earnings growth and resources profits falling.

      James Finch

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