With reporting season kicking off in earnest it has been an interesting week in Australian investment markets. This week we have seen commodity stocks suffer as both BHP & RIO have reported lower profits but unfortunately the bad results didn’t stop there. We also saw:

1. 1. NAB provided guidance for profits but key to their problems were their UK operations and falling net interest margins (funding costs are rising).

1. 2. MQG updated its profit guidance noting it would be down 20-25% on last year.

1. 3. AQP (Aquarius Platinum – not something I pay close attention to mind you) suffered under the weight of falling production, commodity price declines, cost increases and strikes (yikes!).

1. 4. Cochlear (COH), who I have written about here previously, reported revenue growth of 2.9% but NPAT fell 8%. 

All of those negatives aside there were some definite positives too. Most of those however were in the defensive sector. For example:

1. 1. Tabcorp (TAH) reported NPAT increased 14% proving we love to gamble when “times are tough”

1. 2. Telstra (TLS) increased profit although revenue was much unchanged suggesting cost savings were the reason for growth in profit.

1. 3. Reckon Ltd (RKN) – an accounting software company – reported NPAT growth of 6%. Although, that was driven by cost savings more than sales growth much like Telstra & Ansell (who is one of those companies reviewed today).

1. 4. Transurban (TCL) delivered EBITDA growth of 7.5% driven by toll revenue growth of 6%.

So corporate Australia continues, as I suspected, to be a mixed bag. Quality companies will deliver better results but on the updates released this week I continue to firmly believe that patience and cash are the most important tool in your investment tool kit. 

Happy investing!

Nick Rundle

Director of Financial Strategies