Box D: December Half 2004 Profit Results
The latest corporate profit reporting season was a strong one. Half-year profits of the
158 companies in the ASX 200 index that reported for the half year to December 2004 amounted
to $29 billion, 91 per cent higher than in the corresponding period of the previous year (Graph
D1). Underlying profits – which
exclude significant items such as
Graph D1
write-downs – rose by 38 per cent to
ASX 200 Company Profits*
$25 billion.
Semi-annual
$b
Headline profits
Underlying profits
$b
25
25
20
20
15
15
10
10
5
5
0
D
2002
J
D
2003
J
D
2004
D
2002
J
D
2003
J
D
2004
0
* Includes companies with December or June year ends only
Source: RBA
Graph D2
ASX 200 Underlying Profits*
Semi-annual
$b
$b
Consumer staples
8
1.00
Materials
6
0.75
Financials
Energy
Telecommunications
Utilities
4
0.50
0.25
2
Industrials
0
D
2002
J
Health care
Consumer
discretionary
D
2003
J
D
2004
IT
D
2002
J
D
2003
* Includes companies with December or June year ends only
Source: RBA
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B A N K
O F
A U S T R A L I A
J
D
2004
0.00
The growth in underlying profits
was broad-based, with 80 per cent
of individual companies and nine
of the ten broad industry sectors
recording an increase in underlying
profits (Graph D2). The strongest
growth was from companies in the
materials sector, whose profits rose
by 80 per cent. This was particularly
driven by mining companies, whose
profits almost doubled from the
December half of 2003, benefiting
from higher commodity prices and
increased production.
Aggregate
profits
were
roughly 5 per cent above analysts’
expectations, with 70 per cent of
individual companies reporting
profits that were ahead of
expectations. Over the course of the
reporting season, market analysts
revised up their earnings forecasts for
the 2004/05 and 2005/06 financial
years. Forecasts of earnings growth
for the current financial year were
revised up by around 4 percentage
points to 36 per cent, while forecasts
for growth in 2005/06 were revised
up slightly to 9 per cent. The mining
industry experienced the largest
upward revisions to earnings forecasts, with market analysts expecting profitability to remain
high as a result of continued strong demand for commodities.
Growth in listed companies’ underlying profits of 38 per cent was much faster than the
economy-wide measure of profits from the national accounts – gross operating surplus (GOS) –
which was up by 6 per cent in the December half year compared with the corresponding period
of 2003. This difference is partly due to differences in the treatment of specific components of
earnings such as interest, tax and depreciation, and in company coverage. GOS includes unlisted
Australian companies and the domestic subsidiaries of non-resident companies, and excludes
offshore subsidiaries of Australian companies. As a result, mining and financials companies,
which both reported strong profit growth, account for a much larger share of listed companies’
profits than of GOS. R
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