Iluka dives

By InvestSMART · 22 Aug 2013

By InvestSMART ·
22 Aug 2013

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Mineral sands miner Iluka Resources slashed its dividend as profit dived in the first half due to plunging prices and weak demand. Net profit fell by 88 per cent to $34.3 million, as a hoped-for recovery in zircon demand did not occur. It declared an interim dividend of 5¢ a share, fully franked, down 80 per cent on last year's 25¢ payout.

Ridley revamps

Livestock feed producer Ridley Corp will start a program to modernise its mills in the coming year. It commissioned a new mill at Pakenham in Victoria late last year, which, coupled with a recent improvement in sentiment in the dairy sector, should improve earnings in 2013-14. Ridley made a loss of $21.7 million in year to June 30, which it blamed on price pressures in the dairy industry, reductions in the use of feed by dairy farmers and fierce competition.

Deep paper cuts

PaperlinX has incurred another loss but says its performance is improving. The paper merchant made a net loss of $90.2 million in 2012-13, an improvement on a $266.7 million loss in 2011-12. Costs from restructuring and asset write-downs in the latest 12 months were $51.7 million, and the company shed 600 staff, or about 12 per cent of its workforce. The cuts are expected to deliver permanent savings of $35 to $40 million in the year ahead.

Trade Me invests

Shares in Trade Me dropped to a two-month low after New Zealand's largest online auction site said earnings growth would slow in the coming year as it invests more in its business. Profit rose 4 per cent to $NZ78.6 million ($69.7 million) in the year to June 30, on revenue up 15 per cent at $NZ164 million.

Growth fund

Investa Office Fund reported 56 per cent growth in net profit to $158.7 million, from $101.9 million in the previous corresponding period. This was made despite the tough office leasing conditions across the country. The annual distribution was up 1 per cent to 17.75¢, 0.25¢ higher than last year, which included a 1.9¢ special distribution. The earnings for 2014 per unit were expected to increase 6 per cent to 26.5¢.

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Frequently Asked Questions about this Article…

Why did Iluka Resources cut its interim dividend and how big was the profit fall?

Iluka Resources slashed its interim dividend after first-half net profit plunged 88% to $34.3 million. The company blamed plunging prices and weak demand—in particular, a hoped-for recovery in zircon demand did not occur—so it declared a fully franked interim dividend of 5¢ a share, down 80% from last year’s 25¢ payout.

How did weak zircon demand affect Iluka’s results and investor payouts?

The article says the lack of a recovery in zircon demand contributed to falling prices and sharply lower profits for Iluka. That weak demand was a key reason management cut the interim dividend to 5¢ a share and saw net profit fall to $34.3 million in the first half.

What steps is Ridley Corp taking to improve earnings after its loss?

Ridley plans a program to modernise its mills in the coming year and has already commissioned a new mill at Pakenham in Victoria late last year. The company expects those upgrades, together with a recent improvement in dairy-sector sentiment, should help improve earnings in 2013–14 after a $21.7 million loss in the year to June 30.

What caused Ridley’s $21.7 million loss in the year to June 30?

Ridley attributed the $21.7 million loss to price pressures in the dairy industry, reductions in the use of feed by dairy farmers, and fierce competition in its sector.

Why did PaperlinX report such large losses and what cost savings has it targeted?

PaperlinX posted a net loss of $90.2 million in 2012–13, an improvement from a $266.7 million loss the prior year. The company incurred $51.7 million of costs from restructuring and asset write-downs and cut about 600 staff (roughly 12% of its workforce). Those cuts are expected to deliver permanent savings of $35–$40 million in the year ahead.

What did Trade Me report for the year and why did its shares fall?

Trade Me’s profit rose 4% to NZ$78.6 million (A$69.7 million) on revenue up 15% to NZ$164 million in the year to June 30. However, its shares fell to a two-month low after the company warned that earnings growth would slow next year as it invests more back into the business.

How did Investa Office Fund perform and what were its distribution and earnings expectations?

Investa Office Fund reported 56% growth in net profit to $158.7 million from $101.9 million a year earlier. Its annual distribution rose 1% to 17.75¢ (0.25¢ higher than last year, which included a 1.9¢ special distribution), and earnings per unit for 2014 were expected to increase about 6% to 26.5¢.

What are the main investor takeaways from these company results?

The article highlights a mix of company outcomes: commodity-linked businesses like Iluka faced plunging prices and dividend cuts; Ridley is investing in mill modernisation after a sector-driven loss; PaperlinX is cutting costs and jobs to restore profitability; Trade Me is prioritising investment over near-term earnings growth; and Investa Office Fund delivered strong profit and modest distribution growth. Investors may want to note dividend changes, restructuring impacts, and management guidance disclosed in these results.