Australian Stock Market Report –Afternoon 2/21/2013

AFTERNOON REPORT
(4.50pm AEDT)

Local stocks suffered their biggest fall since May 2012 today, slumping by more than two percent as investors booked profits following the recent rally. The All Ordinaries Index (XAO) fell 115.8pts or 2.3pct to 4998.6pts. The ASX/200 (XJO) also dropped below 5000pts, easing by 118.6pts or 2.3pct to 4980.1pts.

Overnight, US share markets fell as the slide in commodity prices weighed on mining and energy stocks. Unconfirmed rumours surfaced that a large US based commodity hedge fund was in trouble and was behind the sharp slide in commodity prices. At the close of trade, the Dow Jones was down 108pts or 0.8pct. The S&P 500 index was down by 1.2pct while the Nasdaq lost 49pts or 1.5pct.

European shares were also mostly weaker on Wednesday.

It was an eventful day on the reporting calendar. Here are some results from today's releases:

Insurance Australia Group (IAG), which has operations in Australia, New Zealand and Asia, more than tripled its first half profit thanks to benign weather conditions and improving market sentiment. IAG made a net profit of $461M in the six months to December 31, while its insurance profit - more closely watched by the market, rose to $815M from $276M in the prior corresponding period. The 1H13 and 1H12 results have been adjusted to reflect the sale of IAG´s flailing UK business in December, with CEO Mike Wilkins saying the sale will eventually increase profits at home and help to expand the Asia business. The Asia business reported a $6M profit in the period. IAG took a $164M loss on the UK business, with a further $80M in foreign currency loss expected in 2H13. IAG received $133M worth of claims in 1H, lower than its natural peril allowance of $310M for the period. IAG has a natural peril allowance of $620M for FY13. Shareholders will receive an interim dividend of 11c per share, fully franked, which will be paid on the 3rd April 2013. IAG shares outperformed the market today, rising to a five and a half year hight, up 2.8pct to $5.57.

ASX Limited (ASX), the operator of Australia´s main sharemarket, reported a $171.1M Net Profit in 1H13 (July - Dec 2012) which was largely in-line with most expectations. Revenue and the dividend payout fell by more than 3pct. This was driven by weak trading volume; fuelled by a more pessimistic consumer & a shaky global economy. Market activity in 1H13 was down an average of 24.5pct a day, hurting a business that relies on providing services, additional floats, & trading to earn income. An interim dividend of 87.9 cps, franked at 30pct was declared. This will be paid out to eligible shareholders on 27 March & goes ex-dividend on 4 March. Since listing back in 1998, the ASX has enjoyed a monopoly in its field & thus improved by an average of 20pct p.a. over 10 years. Chi-X Australia became its first real competitor in Oct 2011; offering a low-cost alternative & taking away a portion of its market share. Looking ahead, a more optimistic consumer & the higher volumes already seen in equity markets this year are positives for the ASX. ASX shares fell 3.4pct to $35.76.

Wealth manager AMP Limited (AMP) announced a net profit for the calendar year 2012 of $704m compared to $688m in 2011 an increase of 2pct. The result was ahead of the markets expectations of a $687m. A final dividend of 12.5 cents per share was announced. AMP shares fell 0.4pct to $5.42.

Australia´s largest airline, Qantas Airways Limited (QAN), more than doubled its profit for the six months to December 2012 to $111M, slightly below market expectations. Revenue rose 2pct to $8.2B while underlying profit before tax was up 10pct to $223M. The underlying profit was at the upper end of QAN´s own guidance and included a $125M payment from Boeing after Qantas amended its 787 Dreamliner orders in August. Chief Executive Alan Joyce said of the result: ´´The operating environment remains complex and volatile, but we are now beginning to realise the benefits of the tough decisions that we have made over the past 18 months.´´ Those decisions included thousands of job cuts and terminating poorly performing routes as QAN competed with Virgin Australia domestically and lower cost Middle Eastern airlines internationally. Qantas will not pay an interim dividend to shareholders. The airline has not returned profits to shareholders since March 2009. QAN shares rose today, outperforming a big fall in the market, up 2.8pct to $1.66.

Brambles Limited (BXB), the global pallet & storage container provider, reported a $490M Underlying Profit in 1H13 (July-Dec 2012), a rise in its sales & a higher dividend. Despite profit being a little lower than market estimates, it was still a 7pct gain on 2011. The result was driven by its Pallets business, which accounted for close to 70pct of total sales. Revenue in the Americas recorded the best gains, propelled forward by new business, efficiencies & better margins. A simplification of its organisation structure in the Pallets segment, in the form of leadership unification was announced. An interim dividend of 13.5cps will be paid out to eligible shareholders on 11 April. BXB confirmed its outlook for the Full-Year & expects a profit of between US$1.03B & US$1.06B. BXB has 4 main segments: Pallets, Reusable Plastic Crates (RPCs), Containers & Recall. Pallet & RPC sales improved by 5pct, Containers edged higher by 2pct, while Recall's sales slipped by 3pct. Recall provides info management solutions. Its shares are up 15pct so far in 2013 & rose after the result to $8.59, a gain of 0.9pct.

Alumina Limited (AWC) reported an underlying loss after tax of $52.5M in 2012, slightly better than market expectations after a larger tax benefit from its Brazilian division. Alumina generates its revenue from its 40pct share of Alcoa World Alumina & Chemicals (AWAC). AWAC runs refineries and miners on 5 countries and it´s expanding its businesses in Brazil. This result was hit by a 12.8pct fall in revenue from AWAC, due to higher input costs; like caustic soda, weak alumina and bauxite prices, one off costs in relation to a lawsuit in Bahrain ($85M) and asset write-offs ($18M). AWAC Alumina production fell slightly, 0.6pct, but this was expected by AWAC closing higher cost refineries and mines. In 2012 AWC did see a significant improvement at its Brazilian mines. On the 14th February CITIC Resources lifted its stake in Alumina to 15pct and today management confirmed that it will use the new cash injection to improve its balance sheet. AWC will not pay an H2 dividend due to concerns over weak cash flow in the current environment. AWC shares today fell 2.8pct to $1.215.

For more information on results announced today, reports can be viewed here:

http://www.investing.commsec.com.au/reportingseason

In economic data today, average weekly ordinary time earnings rose by 3.5pct in the six months to November 2012 to be 5pct higher than a year ago. Private sector wages rose by 5.1pct over the year. Public sector wages rose by 4.5pct over the year.

Wages growth was weakest in Manufacturing up just 2.6pct over the past year, and Arts & Recreation Services (up 2.7pct). But in Administrative and Support Services wages rose by 10.2pct over the year with Mining wages up 8pct.

Across states & territories, we have calculated average annual wages were highest in: ACT ($85,545) from Western Australia ($82,711), Northern Territory ($73,705), NSW ($72,743); Queensland ($71,245); Victoria ($69,212), South Australia ($66,352) and Tasmania ($63,783).

The Australian dollar ended the day's session at US102.36c, £0.6757 and €77.27c.

On the market overall, a total of 2.05 billion shares were traded, worth $7.4 billion. 264 were up, 803 were down and 331 were unchanged.

At 4.30pm AEDT, the SFE 200 Futures index was at 4697, down 106pts.

Ahead tonight, existing home sales, leading indicators, consumer prices and the Philadelphia Fed index are released in the US. The Dow Futures was pointing to a slightly lower start at 4.30pm AEDT.

[Kick off your trading day with our newsletter]