The local reporting season rolls on and here’s the pick of today’s batch of updates from energy powerhouse Origin
(ASX:ORG), ambitious miner Evolution Mining
(ASX:EVN) and global vintner Treasury Wines
(ASX:TWE).
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A heavy loss in 2021-22 for electricity and gas generator and supplier Origin Energy (ASX: ORG) due to impairments that wiped out a gain in underlying profit and, with no sign of any easing in the pressures on the company in the coming year, there’s no guidance.
The bottom line for the June to June 30 was a loss of $1.43 billion which the company had already warned of earlier in the year.
And the underlying result was weaker than analysts and the market had expected.
Origin told the market its underlying profit had risen 30% to $407 million for the 12 months to June 30.
The result was lower than expected, with analysts expecting an average of $536 million.
In spite of the weak underlying result an unsettled market conditions here and offshore, Origin shareholders will not suffer with the company revealing a final dividend of 16.5 cents a share, up from 7.5 cents a year ago.
That made a total for the year of 29 cents a share, up from 20 cents a share for 2020-21.
On a statutory basis, Origin recorded a $1.4 billion loss because of a $2.2 billion non-cash impairment flagged last month.
Origin CEO Frank Calabria said it had been an “almost unparalleled” year of market conditions.
The company said market conditions remained too uncertain to provide formal guidance on earnings.
“There remains uncertainty around the range of potential earnings outcomes for financial year 2023,” he said.
Investors didn’t like this lack of guidance (even though it is easy to understand why Origin took the decision) and the shares sold off 2.6% to $5.91).
“Underlying earnings are expected to be higher, driven by growth in earnings from the gas business, while electricity gross profit is expected to remain suppressed,” Origin did say about expectations for 2022-23.
The fallout from the war in Ukraine continues to impact energy prices and demand here and offshore for LNG, electricity and coal prices.
Origin said a year of record sales revenue from its Queensland liquefied-gas venture had been offset by the blow of higher coal costs and volatile prices hammering its east-coast electricity assets.
Export prices for thermal coal quoted through the Newcastle ICE index touched highs around $US446 a tonne during the final months of the June year and remain well above $US400 a tonne at the moment.
Origin’s Queensland liquefied natural gas (LNG) business, Australia Pacific LNG, which Origin owns with US-based ConocoPhillips and China’s Sinopec, doubled its revenue to $9.2 billion for the year.
Origin’s cash distribution was $1.6 billion which was up from an earlier forecast of $1.4 billion because of the surge in global LNG prices from March to early June.
“Higher fuel costs and coal supply constraints limiting output from Eraring Power Station were among the factors contributing to a decline in Energy Markets earnings, “Origin said on Thursday.
“There were also highlights, including a strong performance in natural gas, growth in total customer accounts, and recent improvements in coal supply to Eraring. We’ve now locked in contracts for 4.4 million tonnes of coal supply — the majority of our needs for FY2023,” Mr Calabria added.
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Will it 5th time the charm for Evolution Mining (ASX: EVN) in its seemingly never-ending ambition to produce more gold each year?
Evolution said yesterday it is on track for a sharp increase in gold production in the 2022-23 financial after again conceding operational performance failed to live up to expectations in 2021-22.
The company’s gold production slumped for the fifth consecutive year to 640,275 ounces, but it is now forecasting a 12.5% boost in production to 720,000 for 2022-23 and 800,000 ounces the following year as it tries to keep to its ambitious recovery program.
Back in 2018 Evolution outperformed, reporting gold production of 801,187 ounces on original guidance: 750,000 – 805,000 ounces.
2021-22’s was down 20% from that peak, a big fall and a sign of the company’s inability top capitalise on its solid assets. Red Lake in Canada has underperformed in recent years.
And it manages to get back to 800,000 ounces in 2024, that will only take it back to 2018 levels for not much progress and a lot of costs in the meantime.
Total revenue rose 11% to just over $2 billion thanks to higher gold and copper prices (which look unlikely to repeat this financial year) and extra output from the now 100% owned Ernest Henry mine in north Queensland.
Statutory net after tax profit dipped 6% to $323.3 million, from $345.3 million in 2020-21.
Underlying after tax net profit was down 22% to $274.7 million from $354.3 million.
Final fully franked dividend of 3 cents a share will be paid, down from 5 cents a share a year ago. That made a full year payment of 6 cents a share, half the previous year’s 12 cents a share.
The halving in the shareholder payout didn’t help confidence and the shares fell 4.4% to $2.57.
Costs rose, including the $250 million for the acquisitions for the Ernest Henry and Kundana mines in Queensland and Western Australia, respectively.
The company also notes that the increase in input prices saw a 4.9% increase in operating costs.
Evolution Mining’s executive chairman Jake Klein said in Thursday’s statement to the ASX, “While our operational performance in the past twelve months did not deliver to shareholders or our expectations, pleasingly the operations ended FY22 in a position to deliver more consistently in FY23.”
“We progressed well with our growth projects, in particular the Cowal underground mine development and the new Upper Campbell underground mine at Red Lake and both projects are on schedule and budget.
“Our studies for organic growth at our operations also advanced, including the mine extension at Ernest Henry; the plant expansion at Mungari; the Pumped Hydro Project at Mt Rawdon; and multiple transformation projects at Red Lake.”
Besides the forecast 24% rise in output over the next two years to 800,000 ounces a year by 2024, Evolution expects little rise in costs
In fact the company expects its all-in sustaining cost (AISC) to remain stable at $A1,240 per ounce during FY23 and FY24.
Labour costs for next year are expected to increase by between 5% and 6% and costs will be kept under control by rising output and economies of scale.
Evolution’s shares are down 36% year to date which is more than the 2.95% fall in the Comex gold price and the 20% slide in Comex copper prices.
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Treasury Wine Estates (ASX: TWE) continues have the last laugh on China for the Xi Jinping government’s punishing tariffs (bans, really) on Australian wine imports.
Even though the ban has caused obvious pain for TWE and the rest of the industry, it hasn’t inflicted the damage that it looked like causing when imposed in 2020.
TWE has been forced to take drastic action (as have other producers and exporters) to find new markets for its wines, re-position brands at new price points and communicate that message to their people and investors where they are listed.
On Thursday TWE produced its 2021-22 annual results and it is clear it is growing sales and earnings, while battling rising costs and supply chain problems (like so many other companies, large and small).
TWE said it expects demand for its luxury wines to remain strong despite rising cost of living pressures, as the company’s strategy of focusing on growth in American and Asian markets to offset China’s illegal tariffs again drove a rise in profits.
Net sales revenue dipped 3.6% to $2.5 billion thanks to lower global demand for commercial wine and the echoes of the Chinese bans.
TWE said net profits arose 5.3% to $263.2 million for the 2022 financial year, while the company’s preferred measure of profitability, earnings before interest, taxes and the cost of harvested grapes (EBITS) lifted 3% to $523.7 million.
The company will pay a full-year fully franked dividend of 31 cents a share, up (an inflation beating) 10.7 % from 2020-21’s payout.
While CEO, Tim Ford warned in late 2021 that the company would be raising prices, that seems not to have much impact on demand.
“The strength of a number of TWE’s luxury and premium brands enabled targeted price increases in 2022,” the company said in Thursday’s earnings commentary
“TWE has implemented further price increases within all divisions in (the 2023 financial year), specifically on growing premium and supply constrained luxury brands.”
Overall, Treasury Wines’ American brands – which include Beringer, Matua, Sterling and Snoop Dogg’s 19 Crimes – did better than then more costly Penfolds range in the year to June 30 (because the loss of the Chinese market is still having an impact on Penfold’s sales).
EBIT from the Penfolds range fell by 7.8% to $319.3 million while EBITS from its Treasury Americas portfolio rose 20.5% to $185.6 million, boosted by the acquisition of Frank Family Vineyards.
Global supply chain costs and inflationary pressures also weighed on the business, costing $25 million in the 2022 financial year. RWE expects these pressures to take another $25 million bite in 2022-23.
The company said it believes the current environment is conducive to strong performance for its trusted and well-known brands.
“Wine consumption in TWE’s key global markets is currently, and expected to remain, strong for premium and luxury price points,” the company said in its results.
The company is pushing ahead with plans to make Penfolds wines in China and France which should be a big challenge to the Chinese government.
