Australian Stock Market Report – Afternoon 8/7/2012

MARKET CLOSE
(4.30pm AEST)

Local stocks hit a fresh three month high today as a further stabilisation of the European debt crisis supported resource and financial stocks. Trading volumes remained thin however, on the back of yesterday's Bank Holiday in NSW and the ACT, and with many traders attending the annual Diggers & Dealers mining conference in Western Australia. The All Ordinaries Index (XAO) rose by 18.5pts or 0.4pct to finish the day's trade at 4311.4.

The Reserve Bank of Australia today left the official cash rate at 3.5pct for the second month in a row.

On the market, energy and mining sectors rose by almost 1pct each thanks to firm base metals trade in London. BHP Billiton (BHP) added 0.5pct to $32.16 while Rio Tinto (RIO) was up 1.3pct to $54.85 and Fortescue Metals Group (FMG) added 3.3pct to $4.40.

August 2012 reporting season officially kicked off today, with Cohclear (COH), Transurban (TCL), Leighton Holdings (LEI) and Bradken Limited (BKN) amongst those reporting results.

Bionic ear maker Cochlear Limited (COH) reported a huge drop in annual earnings, due to costs associated with a product recall in September. Net profit after tax including the $101.3 million recall cost, came in at $56.8 million for the 12 months to June 2012, down 68pct from earnings of $180.1 million in the previous financial year. NPAT excluding the recall expenses was $158.1 million, only a little lower than the $160 million figure analysts had predicted. CEO Chris Roberts said this had been a challenging year for the company, due to the voluntary recall of the CI-500 implant device last year. However Dr Roberts said Cochlear is well positioned to take advantage of global clinical trends and growing demand for hearing implants due to our ageing population. The company will pay a final dividend of $1.25 per share on 20th September 2012, franked at 35pct. Total dividends for the year came in at $2.45, up 9pct from $2.25 paid to shareholders in 2011. COH shares fell 5.1pct to $63 after rising strongly yesterday.

Toll road operator Transurban Group (TCL) halved its annual earnings, due to a write-down on one of its motorways in the US. Net profit for the 12 months to June 30 came in at $58.6 million, down 50.4pct on the 2011 result. The result included a $138.1 million charge on its Pocahontas 895 toll road in the US state of Virginia. Statutory toll revenue for the year came in at $765.4 million, up 5.7pct on the previous year´s result. Transurban´s CityLink toll road in Melbourne posted the strongest revenue growth. Total revenue came in at $1.15 billion for the year. Transurban owns Melbourne´s CityLink, Sydney´s Lane Cove Tunnel and M2 toll road, as well as major stakes in Sydney´s Eastern Distributor, Westlink M7 and M5. The company will pay shareholders a final dividend of 15c per share, taking total payments to 29.5c. The dividend will be payable on the 14th August 2012. TCL has forecast dividend payments of 31c per share for the year to June 2013. TCL today fell 1.5pct on the market to close at $5.94.

Construction giant Leighton Holdings Limited (LEI) today reported a 1H net profit after tax for the six months to June 2012 of $115M, and reaffirmed it expects Full Year earnings between $400-450M, excluding the capital gain on the July sale of its Thiess Waste Management services. Leighton recently changed its financial year to reflect the calendar year, meaning the six month period ending June 30 2012 must be compared to the six months which ended December 2011, rather than June 2011. NPAT was down from December´s profit of $340M, but significantly higher than the $626M loss recorded in June 2011. LEI expects to report a stronger performance in the second half of 2012 due to the completion of Brisbane´s Airport Link Project and progress made on the Victorian Desalination Plant. It will pay shareholders an unfranked interim dividend of 20c per share, on September 28 2012. It paid a final dividend of 60c per share in December 2011. LEI shares today fell 1.5pct to $16.48.

The resources boom boosted industrial equipment maker Bradken Limited´s (BKN) full year profit by an impressive 49%. Growing demand from resource players across the globe saw BKN´s net profit for the year to June 30 2012 come in at $100.5M, up from the previous corresponding period´s earnings of $67.6M. Sales rose 26% to $1.45 billion. Shareholders will receive a final dividend of 21.5c per share, taking total payouts for shareholders to 41c for the financial year, up 4% from last year´s payments of 39.5c. The final part of the dividend, 21.5c per share, will be paid on the 4th September, 2012 and is the highest return to shareholders in Bradken´s company history. Bradken told the ASX that demand for products used in its mining equipment is showing no signs of weakening from current record levels. The company has a record amount of orders for the first six months of the 2012/13 Financial Year, but said the outlook beyond that remains uncertain, particularly in coal markets. BKN shares today rallied by an impressive 11.2pct to $5.74.

The Reserve Bank Board today left the official cash rate at 3.5pct for the second straight month. The variable housing rate is applying modest stimulus to the economy at present at 6.85pct, below the 15-year average of 7.2pct. The next RBA Board meeting is on September 4 2012.

The Reserve Bank is clearly now in "wait and see" mode," said CommSec Chief Economist Craig James. "The European and Chinese economies slowed in late 2011 and early 2012 while the US recovery proceeded slowly. As a result the Reserve Bank cut the cash rate by 1.25 percentage points in the space of eight months."

The Australian dollar ended the day's trade at US105.73c, £0.6792 and €85.36c.

On the market overall, a total of 1.24 billion shares were traded, worth $3.1 billion. 458 were up, 396 were down and 358 were unchanged.

At 4.30pm AEST on the ASX24, the futures contract was at 4247, up 17pts.

Ahead tonight, consumer credit data along with weekly chain store sales data is released in the US.

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