Australia Company Profits Advance More Forecast on Mining and Construction

By Michael Heath - Dec 5, 2011 7:40 AM GMT+0700

Australian business profits advanced more than economists estimated in the three months through September, the second straight quarterly gain, as earnings strengthened in mining and construction.

Gross operating profits gained 4.8 percent in the third quarter from the previous three months, when they rose a revised 7.3 percent, the Bureau of Statistics said in Sydney today. The result compares with the median forecast for a 3 percent gain in a Bloomberg News survey of 15 economists.

Reserve Bank of Australia Governor Glenn Stevens will lower the overnight cash rate target tomorrow for a second straight meeting, 13 of 25 economists in a Bloomberg News survey predicted, as Europe’s debt crisis threatens global growth. Australia’s exports are rebounding after storms and floods devastated the nation’s northeast in the first quarter.

“Export prices likely peaked at an all-time high in the third quarter,” Kieran Davies, a Sydney-based economist at Royal Bank of Scotland Group Plc., said in a research report before today’s release. As a result, mining profits may fall in the fourth quarter, he said.

The Australian dollar has gained 3.1 percent against its U.S. counterpart in the past 12 months, the third-best performer among the 16 major currencies tracked by Bloomberg. That strength has hurt the nation’s manufacturers and other non- resource industries.

Currency Reaction

The Australian dollar was little changed after the data. The so-called Aussie traded at $1.0243 as of 11:32 a.m. in Sydney from $1.0244 earlier.

From a year earlier, profits advanced 8.8 percent, today’s report showed.

Profits at mining companies advanced 5 percent and construction jumped 21.7 percent in the third quarter, while financial and insurance services earnings gained 36.1 percent, according to today’s report. Profits at manufacturers fell 3 percent and earnings declined 2.9 percent at retailers, it showed.

Inventories held by companies fell 1.1 percent in the third quarter. Economists had forecast a 1.2 percent gain.

Gross operating profit measures earnings before tax, interest, depreciation and amortization. It excludes asset sales and foreign-exchange gains or losses.

The RBA on Nov. 1 lowered its benchmark rate from a developed-world high of 4.75 percent to 4.5 percent help boost domestic demand, its first reduction in 31 months.

BHP Billiton Ltd., the world’s biggest mining company, said last month fiscal second-half profit rose to a record, beating analyst estimates, after prices of copper, iron ore and coal reached all-time highs because of demand from China.

To contact the reporter on this story: Michael Heath in Sydney at mheath1@bloomberg.net

To contact the editor responsible for this story: Stephanie Phang at sphang@bloomberg.net