Updates: Qantas, GWA to Impose Job Cuts

Qantas yesterday joined the gathering rush of corporate restructuring in Australian business.

The strong Australian dollar and tough trading conditions in some sectors of the economy have ignited the push by more and more companies to trim and rebalance here and go offshore in some cases.

It's happening everywhere, from steel, to retailing, to government services, banking and finance, (Westpac) building and construction (GWA Group), jobs are being shed, capacity being closed and in some cases, investments are being made offshore.

And Qantas after hinting at the news last month, surprised yesterday by revealing its plans, a week ahead of its previously announced date of August 24.

The airline revealed it will cut up to 1000 jobs from its 36,000-strong workforce as part of a five-year strategic plan that includes orders for new Airbus aircraft and closer alliances with other airlines including British Airways.

That news ran into opposition (naturally) from unions, which threatened legal action to try and stop it.

The proposals received a better reception from the stockmarket with the airline's shares up 7c to $1.605, before falling back to end the day down half a cent at $1.525.

It seems investors didn't like the strong reaction to the airline's planned job losses.

In making its announcement Qantas said the changes would affect about 1000 jobs but it would be "looking to minimise the number of compulsory redundancies wherever possible".

It said the new aircraft would cost $9 billion, but that would involve long delays to taking delivery of the last six massive Airbus A380 planes currently on order.

Qantas also said it would launch a new, premium Asian airline as well as a Japanese low-cost carrier, the latter jointly with Japan Airlines and Mitsubishi.

"To do nothing, or tinker around the edges, would only guarantee the end of Qantas International in our home Australian market," chief executive Alan Joyce said in yesterday's statement, adding that the international operation's cost base was about 20% higher than its major rivals.

"We have established a five-year plan that has the objective, first, of returning Qantas International to profitability in the short term.

"In five years, the Qantas flying businesses, domestic and international combined will exceed the cost of capital on a sustainable basis," Mr Joyce said.

Qantas foreshadowed its announcement by placing full page advertisements in metropolitan newspapers yesterday about a "new Qantas [which] will take on our global competitors" with a "state-of-the-art fleet".

Qantas will reveal more detail of its strategic review of its premium international business on August 24.

The advertisements also trumpet that the airline will offer passengers "more choices through new gateways to more destinations around the world".

The guts of yesterday's announcement was:

Qantas will launch a direct flight to Santiago, replacing Buenos Aires as the entry point to South America.

Restructure the joint services agreement with British Airways.

Develop the joint agreement with American Airlines.

Explore opportunities with Malaysia Airlines.

The airline will invest in products and services, including:

Having 12 A380s in service by the end of the year and upgrading 747s.

Establishing premium lounges in Singapore, Hong Kong and Los Angeles.

Increasing points earnings opportunities.

Qantas will aim to enhance its presence in Asia by:

Creating a new premium airline based in Asia, with a new name, new aircraft and new look.

Launching Jetstar Japan as a new low-cost carrier together with Japan Airlines and Mitsubishi.

Qantas will make changes to its fleet plan by:

Buying 106 to 110 Airbus A320s to support growth.

Deferring delivery of final six A380s by up to six years.

Retiring four 747s.

Mid-level industrial, GWA Group has joined the restructuring push with plans to cut jobs and import more products to try and offset the strong Australian dollar.

The Brisbane-based building products and fixtures supplier says it will cut 169 jobs in response to weak demand from the housing sector and the dollar's strength.

GWA revealed this plan after reporting a solid 14.3% rise in net profit to $63.34 million for the 12 months to June 30.

That was on a 10.6% rise in revenue to $726.37 million.

And the company also said in its profit statement that it would be paying a steady final dividend of 8.5c a share.

That means an unchanged total payout for the year of 18c a share.

Despite that, the shares slumped by almost 6% to $2.40 by the close.

GWA Group chief executive Peter Crowley said while the company recorded an 11% increase in sales, underlying Australian demand increased by just one per cent.

He declined to offer earnings guidance for the 2012 financial year and said it was "pretty hard to see where it's going".

He predicted new dwelling completions will fall while renovations will remain flat this year.

Mr Crowley said the company needed to restructure further this financial year because of the strong Australian dollar and high cost of manufacturing in Australia.

The restructure would result in an eight per cent "reduction" in GWA's total workforce this financial year, costing about $20 million. That was 169 people.

Operations at the company's largest factory in Wetherill Park in Sydney would be cut back to a single shift as more products came from offshore.

Despite the changes, Mr Crowley said the company remained "committed" to being an Australian manufacturer.

He also told analysts that GWA did not support the federal government's carbon tax.

The company said that in financial 2011, it benefited from "good volumes," an improved product mix and the government's schools stimulus package.

But the strong Australian dollar had a negative effect on earnings.

Tabcorp has reported a 14% rise in full-year net profit for the year to June and says it now expects to pay 50% of its net profits in dividends in 2012.

The company said that would rise to 80% in the 2013 year.

The result was the first since Tabcorp split into two companies in June.

Full-year net profit was $534.8 million, compared to $469.5 million.

Directors declared a final dividend of 19 cents a share.

That took the total for the year to 43c a share, in line with previous guidance for dividends to be 60% of earnings.

Tabcorp shares rose 3c to $3.22 yesterday.

Tabcorp split itself into two firms in June, with the casinos group Echo Entertainment Group owning assets including Sydney's Star City casino and Jupiters on the Gold Coast.

Tabcorp retained the gaming and wagering businesses.

And Echo Entertainment Group yesterday reported a full year net profit of $226 million.

Echo said that because Echo was a part of Tabcorp until its demerger, net profit was not comparable to previous years and included interest and tax charges that were not reflective of future levels.

Echo did not declare a final dividend as much of the reported earnings were generated before the split and will be paid out by Tabcorp in its final payment to shareholders.

Revenue for the year ended June 30 was $1.65 billion.

Echo shares jumped 7c to $3.83 in a late flurry of trading yesterday after being steady at $3.76.