Billabong wipes out guidance

BILLABONG shares were crunched more than 25 per cent yesterday when its full-year profit came in at the bottom end of guidance.

Heavy selling of its stock was further fuelled by the surfwear company scrapping its 2012 earnings guidance in the face of a lurching global economy and plummeting sharemarkets. Billabong said the rapid and sustained appreciation of the dollar against the US dollar and the euro had undermined earnings.

Its forecast a year ago that it would generate earnings-per-share growth of 10 per cent in 2011-12 was consigned to the bin given flat forward-order books across Australia, North America and Europe as consumers reined in spending. A higher effective tax rate would also shrink profits.

Although Billabong still expects financial benefits from cost cutting and a string of acquisitions to feed into its 2011-12 pre-tax results, it said the bottom-line profit would be squeezed by particularly poor sales from its European operations.

''We saw a definite drop-off from the European consumer as soon as the latest round of the Greek debt crisis started [in May],'' said chief executive Derek O'Neill. ''It started being a little bit more contagious to countries like Spain and even Italy.

''It's a bit like what you see in Australia. Frankly the headlines every day and the 6 o'clock news bombarding you with that financial information, and at some point that feeds down into the consumer psyche and that is what we have definitely felt in Europe.''

Combined with the failure of a global economic recovery to take hold, and conditions actually deteriorating outside of North America and Asia, Billabong said it was now unable to offer any guidance on earnings per share.

On a day when investors were reeling from sharp falls on Wall Street and across European markets, the poor result and discarded earnings outlook triggered panic selling of Billabong shares, with more than $330 million in value wiped off its market capitalisation by the close of trade. Shares ended on the day's low, down $1.35, or 26.1 per cent, at $3.82.

The company, which owns a portfolio of popular surf, diving, swimwear and footwear brands, posted an annual profit of $119.139 million for the year to June 30, down 18.4 per cent despite a 13.5 per cent lift in revenue to $1.688 billion. Earnings before interest, tax, depreciation and amortisation were down 16.2 per cent in constant-currency terms, and down 24.3 per cent in reported terms.

It declared a final dividend of 13?, 3.25? franked, down from 18? in 2009-10 and payable on October 21.