The scatty nature of the slowing Australian economy is showing up in the interim results from banks, retailers, media companies, property, building and some of our major global groups.

From the Commonwealth Bank, to News Corp, to BHP Billiton, and AWB, the profit reports have revealed balance sheets or businesses facing rising pressures peculiar to their sectors, or from the economy as a whole.

And yet for some, like still growing retailer, JB Hi-Fi and global hearing products exporter, Cochlear, conditions are better than you would have expected .

The Commonwealth Bank revealed, as forecast a 16% drop in cash earnings for the first half of $2.013 billion. The bank warned it might not be able to maintain its dividend at current levels given the outlook for the sector of slowing growth and rising bad debts, but at least one of our banks still has the luxury of considering cuts to shareholder payments, unlike in the US and Europe where they have vanished.

“With domestic and global economies slowing or in recession, sentiment continues to deteriorate. While key indicators such as credit growth and unemployment remained reasonably benign, conditions are expected to become more difficult in the second half,” the CBA warned this morning.

“Impairment Expenses increased significantly with much of this increase driven by exposure to a limited number of high profile corporate customers whose business models have been under pressure for some time. While there has been no evidence of a systemic deterioration in credit quality in the commercial portfolio, it is clear that customers are being increasingly impacted by the slowing in the real economy. Arrears rates in the consumer portfolio have begun to trend upwards, although they still remain at low levels. As economic activity slows and unemployment rises, pressure on retail customers is expected to grow.”

The pressure in property is already showing with the likes of Westfield and Mirvac cutting asset values and raising billions of dollars.

Stockland, our best placed property group, has been no different, cutting asset values during the year and raising 4300 million. Today it revealed a statutory loss (including non cash items) of well over $700 million, against an interim statutory profit in the first half of 2008 of over $600 million. More write-offs and cuts to property values here and in other markets hurt. But it will still pay a distribution after making a smaller operating profit.

But it has curtailed all non-essential spending and is raising millions of dollars by flogging off unwanted assets as it retreats to its core businesses.

“All uncommitted development expenditure in Commercial Property, Apartments and the UK has been deferred until markets improve, although work will continue to secure development approvals. Such deferrals result in minimal additional holding costs, as many projects are existing income producing properties. Stockland continues to actively manage its portfolio, with a total of $220.7 million in non-core asset sales achieved in 1H09. Since balance date, a further $85.5 million of non-core asset sales have been settled.”

Ansell Limited an interim profit of US$54.1 million, up 9% on the reported prior year result of US$49.6 million. That was partly due a tax benefit from losses, but the company reported steady sales (in a slumping global economy) and higher Australian dollar earnings for the half because of the lower Australian dollar. Despite warning of a tougher outlook:

“However, the second half outlook, with lower Occupational sales and actions taken to reduce excess Occupational inventories, requires a more cautious view,” the company still increased interim dividend by 9%.

Yesterday Cochlear, the global giant in hearing implants, revealed a 14% lift in dividend and a solid first half profit rise of 22%, and expectations to repeat that in the June half.

And JB Hi-Fi revealed a 40% rise in interim profit and a 50% increase in dividend and is continuing with plans to open new stores, unlike its peers like Harvey Norman, which will report a lower profit and is closing up to 10 stores. Both David Jones and Myer reported a fall in same store growth, JB Hi-Fi said its comparable store growth rose 11.1%.

Building products group, Boral, confirmed its guidance from last month of a 40% plus fall in interim earnings. The company said this morning the slump in the US and Australian building sector had hit earnings, cutting them by 44% to just $75 million. And yet it’s still paying a dividend, reduced, of 7.5 cents a share, compared to 17 cents in the first half of the 2008 financial year. In the US, UK and Ireland companies servicing the building and construction sector are reporting horrendous losses, if they haven’t gone broke by now.

BHP Billiton had a solid first half, but warned of a tougher second half. Tomorrow its one time target, Rio Tinto will confirm 2008’s result was good, but that 2009 will be rotten as it reveals asset sales and raises fresh capital to attack its $US37 billion or so in debt. It won’t be pretty and will confirm that the resources sector will take a lot of attention when the final reporting season starts in August.

Peter Fray

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