The Australian Loser Hall of Fame. Much is made by business of its ability to invest wisely (compared with government), much is claimed by business to manage wisely (instead of government and individuals), and much is made by investment managers and fund managers/brokers, etc, of their ability to pick winners, avoid losers and beat the market (compared with government and individuals). Today, in the first list of losers of the current reporting season, we detail some of the investment atrocities made by some of the “pillars” of the Australian corporate scene.
In no particular order, except it’s a nice number and it is out Friday morning, we lead off the batting with Atlas Iron, flattened by the iron ore slide and overspending and everything else. It revealed a staggering $1.4 billion loss this morning, including asset impairments and write-downs of almost $1.1 billion. Wonderful going that. A gold-star performance.
And then there’s Whitehaven Coal: all positive about coal (Tony Abbott’s gift to humanity), but not without its contribution to the hall of hell of corporate losers — a $355 million impairment charge in relation to early-stage exploration assets, and a smaller $65 million charge relating to the repeal of the minerals resource rent tax.
And we can’t forget AGL Energy, that tireless raider of our power and gas budgets. It revealed one-off impairments and losses of $808 million for the year to June. Can that be a gold medal performance, or merely bronze, or worse?
And then there’s AGL rival, Origin Energy, which has racked up write-downs and impairments in the year to June of a smidge over $1 billion. It could be a contender for the gold medal slot — stay tuned until August 20, when the whole horrid mess is revealed.
Of course, News Corp made a modest entry of its own this week, compared with its efforts of two or three years earlier when it really sprayed the red ink around. This year’s effort was US$371 million — that’s around A$510 million (depending on exchange rates), which is a decent effort, but unlike its previous efforts.
Santos will confirm its entry later this month with its interim report. That was a $1.6 billion effort relating to the writing down of the value of oil-producing assets in the Cooper Basin and exploration areas in NSW. This is a contender, and following the renewed fall in oil and gas prices in the past two months, you’d have to wonder if Santos’ board is grappling with a new batch of red-ink write-downs, or will wait until the full-year results next February. But it’s a contender. — Glenn Dyer
But wait, there’s more … Try engineer and metal-basher Bradken — it slipped out a $259 million tiddler at the start of this week. Handy, but frankly, a little light on in the shock-and-awe stakes. Then there’s engineering group WorleyParsons. It’s already warned of write-downs and this week estimated them at around $200 million. Like Bradken, encouraging, but not the sort of performance you’d expect from an Australian company these days. Like the Australian cricket team: more effort needed!
That is something you can’t accuse explosives-maker Orica of needing. A week ago today it produced a surprise of its own: a warning of impairments totalling $1.6 billion to be confirmed when the September profit report is released later in the year. This is a real A-grade effort. Of course, there’s a new management team there after Ian Smith quit amid claims of staff bullying. But his replacement, Alberto Calderon, was at a board meeting before getting the CEO’s gig, so he has some skin in this game.
Hills, the Adelaide company, normally would be a footnote with its $94 million impairment, but compared to some of these other companies, it’s a tiddler, a baby among giants, so proportionately the write-down has hurt it probably more than Orica’s or Origin’s. And besides, the $94 million is the cost of cleaning up some of the mess and costs left behind by the former CEO Ted Pretty. No final dividend for Hills shareholders as a result, so it has a big impact. Of course the Hills board remains in place … — Glenn Dyer
But finally. Barring any more unforeseen accounting honesty, the gold medalist for the 2015 calendar year will be BG Group, about to be taken over by Shell. And in a balance sheet and accounting clean up earlier this year, wrote down the value of its Queensland coal seam gas LNG project by a total of US$6.8 billion (or well over A$9 billion). That’s a top performance. But it is a long way short of the top performer of the past seven or eight years — the motor mouths at Rio Tinto. Rio’s cumulative write-downs on Alcan, Mozambique coal, aluminium and bauxite around Australia and elsewhere is north of $25 billion. A history-making performance and remember fund managers, brokers, bankers and governments have all supported these companies, and in many cases invested your hard earned super money into these slack performers (as did many individual investors). The cumulative cost of this modest list is between A$11 billion and $A12 billion, so far (excluding Rio’s hysterical effort). That is a lot of tax deductions, because that is what these write-downs become for companies lucky enough and strong enough to survive these shocks. That means you pay again! — Glenn Dyer