Australian Stocks Drop; Commonwealth, Telstra Fall on Earnings

By Shani Raja

Aug. 13 (Bloomberg) -- Australian stocks slumped, led by Commonwealth Bank of Australia and Telstra Corp. after the companies' earnings disappointed investors.

Telstra slipped 4 percent, the biggest decline since March 3, after Australia's largest phone operator forecast earnings growth that missed analysts' estimates. Commonwealth Bank, the nation's biggest mortgage lender, lost 1 percent after posting the slowest earnings growth in four years as bad debts doubled.

``The number of companies surprising on the upside is well down on past years,'' said Shane Oliver, Sydney-based head of investment strategy at AMP Capital Investors, which manages about $108 billion. ``It's part of the tougher, more uncertain environment we've come into.''

The S&P/ASX 200 Index fell 102 points, or 2 percent, to 4,951.60 at the close of trading in Sydney, the most since July 25, extending its loss this year to 22 percent. Australian companies have struggled to match recent years' earnings growth amid 12-year high interest rates and after oil prices surged to a record, fanning inflation.

Telstra said earnings before interest and taxes will rise as much as 8 percent this fiscal year, trailing the 12 percent median of nine analyst estimates compiled by Bloomberg. The company revised plans for network spending and job cuts.

Commonwealth Bank led financial shares lower after Chief Executive Officer Ralph Norris said he'll take a conservative approach as the economy slows and increased borrowing costs squeeze margins. The lender said full-year profit rose 7 percent to A$4.79 billion.

National Australia Bank Ltd., the nation's biggest by assets, dropped 3.4 percent to A$25.58, the most since July 29. St. George Bank Ltd., the No. 5 lender, lost 2.8 percent to A$30.43.

U.S. financial stocks fell yesterday after JPMorgan Chase & Co. said it may post more credit losses, pushing the worldwide costs for the collapse of the subprime mortgage market to more than $500 billion. The Standard & Poor's 500 Index slid 15.73 points, or 1.2 percent, to 1,289.59.

The following companies were among the best and worst performers on the Australian stock exchange.

Cochlear Ltd. (COH AU), maker of the world's biggest-selling hearing implant, gained A$4.01, or 8.5 percent, to A$51.15, the index's biggest gainer. The company yesterday reported net income rose 13 percent to A$58.1 million ($51 million) in the six months ended June 30.

Computershare Ltd. (CPU AU), the world's biggest share registrar, slumped 53 cents, or 5.3 percent, to A$9.46, the most since July 25, after saying earnings per share next year will probably slow to approximately 10 percent.

Eureka Energy Ltd. (EKA AU), a base metals and diamonds explorer, rose 2 cents, or 14 percent, to 16 cents, the most since July 22. Adelphi Energy, Eureka's partner in the Sugarloaf project, said a well being drilled in Texas began producing about 180,000 cubic feet of gas per day.

Murchison Metals Ltd. (MMX AU), an Australian iron ore producer partly owned by U.S. hedge fund Harbinger Capital Partners, fell 35 cents, or 13 percent, to A$2.30, the lowest since April 2007. The Standard & Poor's GSCI commodity index fell as much as 1.4 percent to a four-month low and has skidded 22 percent into a bear market from a July 3 record.

Odyssey Energy Ltd. (ODY AU), an oil and natural gas explorer, dropped 4 cents, or 13 percent, to 26 cents, the most since July 7, after Marion Energy Ltd. said it raised funds enabling it to buy Odyssey shares in the Helper and Oklahoma gas projects in the U.S.

Ventracor Ltd. (VCR AU), which makes artificial heart pumps, advanced 1 cent, or 4.1 percent, to 25.5 cents, the highest since June 20. The U.S. Food and Drug Administration approved enhancements to a Ventracor device to assist heart patients, the company said in a statement yesterday.

To contact the reporter on this story: Shani Raja in Sydney at sraja4@bloomberg.net.