Business Up Downunder

MELBOURNE, Aug 5 Reuters reported that analysts expect Australia's manufacturers to post bumper profit growth for the year just ended, outstripping other sectors with the help of acquisitions, lower import costs, and a robust domestic economy. Steel makers are expected to outshine the rest, at least doubling their profits on the back of a booming Australian housing market, a pick-up in engineering projects, cost cuts and asset purchases.

"The Australian economy's been quite buoyant over the last 12 months and that's come predominantly from the manufacturing sector," said Portfolio Partners industrials analyst Chris Williams.

"The steel companies are going to be exceptional from a very low base in 2001, as they move back towards sustainable growth and sustainable profit figures," he said.

While the share market benchmark S&P/ASX 200 has fallen nearly 11 percent since January 1, shares of the larger manufacturers have climbed between two percent and 38 percent, with OneSteel Ltd <OST.AX> standing out at the top end.

CLEAR SIGNPOSTS

Several companies provided fairly specific guidance to the market on what to expect in their 2001/02 results, which prompted upgrades on forecasts for some groups.

Steel long products maker OneSteel said last month its profit would land between A$43 million and A$47 million, beating market predictions of around A$38 million and soaring above the previous year's profit of A$23.6 million.

Australia's biggest paper maker, PaperlinX Ltd , indicated after the first half that it expected a full year profit jump of about 14 percent to A$121 million. Amcor Ltd <AMC.AX>, one of the world's top three packaging groups by sales and market capitalisation, said in a share placement prospectus in May that its 2001/02 annual profit was likely to be about 10 percent stronger than the previous year.

Amcor's forecast would imply a net profit of nearly A$262 million after interest payments on its reset securities (PACRS) and before an asset sale gain.

However its headline profit will be above A$800 million, compared with A$282 million for 2000/01, before PACRS payments of A$34 million and including a gain of more than A$500 million on the sale of its stake in Kimberly-Clark Australia.

OUTLOOKS KEY

Analysts said they would be looking for some indication from Amcor on the outlook for resin prices in Europe, a key input for its flexible packaging business, and the expected impact on the group's margins.

Merrill Lynch analyst Simon Archer said while Amcor had so far been able to weather rising resin input prices, partly due to a lag in price increases filtering through in contracts, the company might start to feel the pinch in the current half year.

Amcor shares soared in May to a record high of A$9.20 after it bought German packaging giant Schmalbach-Lubeca, turning Amcor into the world's biggest maker of plastic bottles. Its shares have since eased to trade around A$8.30, but are still up 17 percent since the start of the year.

For automotive supplier Pacifica Group Ltd, which will be reporting its first half profit, analysts said they hoped to see climbing sales to car makers in Australia and the United States and stronger margins pumping up the bottom line.

"In the past, Pacifica has been able to achieve robust volume growth. It's important to see that volume growth translated into higher earnings," said Merrill Lynch analyst Jeanine Angell.

In contrast, Ansell Ltd , one of the world's top three latex gloves and condoms makers, was expected to report a fall in profit before one-offs, having sold several businesses in the break up of the fallen manufacturing icon Pacific Dunlop.

Its bottom line would again be in the red, due to more than A$125 million in writedowns taken in the first half on its investment in Exide Technologies and an Ansell plant and more Exide writedowns in the second half.