Australia's June half earnings season recap and upcoming reporting challenges

Company News

by Glenn Dyer

The Australia June half earnings reporting season has concluded, yet there remain some July 31 balancing companies to report, in order to finalize the 2022-23 financial picture.

Companies yet to report for July 31 include Myer and Premier Investments (although there are indications about their performance), Washington H Soul Pattinson, New Hope, and Brickworks will also report shortly.

The 2023 segment of the financial year will not conclude until all September 30 companies finalize their books. This group encompasses major banks like ANZ, NAB, Westpac, and Macquarie, along with Incitec Pivot, Orica, Nufarm, Elders, GrainCorp, and possibly United Malt.

Analysts suggest that the June season surpassed initial fears, though expectations were adjusted downward due to cautious corporate guidance. This is evident in the adjustments to estimates for the 2023-2024 period.

"Upside and downside surprises have been nearly balanced, with around 36% surprising on the upside (below the average of 43%) and 34% surprising on the downside (higher than the average of 26%)," notes AMP's Chief Economist, Shane Oliver.

He further mentions that 58% of companies experienced earnings growth compared to the previous year, lower than the average of 63%. Additionally, only 43% increased dividends from the previous year, below the average of 58%, indicating a degree of caution for the upcoming financial year.

Moreover, 51% of companies saw their share prices outperform the market on their reporting day. Although better than the February reporting season, this falls slightly under the average of 53%.

Key themes emerging from the earnings results include persistent cost pressures, building material companies benefiting from robust activity but cautioning about a potential slowdown, insurers achieving margin improvement at the cost of customers through significant premium hikes, and a resilience among home borrowers in keeping up with payments despite pending rate hikes. Corporate guidance has generally been cautious, with more negative than positive outlooks. Retailers, in particular, are signaling tougher conditions and observing better-off customers turning to discount stores for value.

Looking ahead to the year ending next June, Dr. Oliver believes that due to the cautious guidance, consensus earnings projections have been lowered since the start of the reporting season. The consensus now anticipates a +1.5% earnings increase for 2022-23 and a -5.7% decline for 2023-24. These figures have been adjusted from +2.5% and -0.8% respectively, as of the end of July.

Glenn Dyer

Glenn Dyer has been a finance journalist and TV producer for more than 40 years. He has worked at Maxwell Newton Publications, Queensland Newspapers, AAP, The Australian Financial Review, The Nine Network and Crikey.

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