Dec 21 Australian companies' profits are likely
to grow for in the fiscal year ending June 2017, following two
straight years of declines and supported by a pick-up in
commodity prices as demand from China makes a steady recovery.
A Reuters average of analyst estimates and historical
earnings of the top 138 companies by market capitalisation shows
their profits are expected to grow by 9.8 percent in the fiscal
year, the fastest growth in six years and reversing two
consecutive years of declines. Analysts have upgraded the
Australian companies' earnings over the next 12 months by 4.4
percent over the past month, the highest upgrade of any
Australian company profits fell 14 percent in the fiscal
year ending June 2016, and by 0.2 percent in the fiscal year
ending June 2015.
The earnings growth this year is likely to be driven by the
metals and mining sector, whose earnings are expected to grow
42.1 percent, while utilities are expected to grow 12.4 percent,
telecoms 11 percent and consumer companies by about 8 percent.
The improved earnings expectations are driven mainly by
rising commodity prices such as coal and iron ore
, which have roughly doubled this year. This helped the
country's terms of trade rise 4.4 percent on-quarter in
November, the highest growth in more than five years.
China, Australia's biggest importer, posted its strongest
import growth in two years in November. It also
posted the fastest rise in producer prices in five years.
Analysts say the acceleration in upstream inflation
would help the margins of Australian produce exporters.
"For the first time since the (global financial crisis)
recovery in late 2009, the ASX 200 appears to be going through
an earnings upgrade cycle," Goldman Sachs said in a note
published this month.
Goldman said Australia is more exposed to positive
reflationary forces through its commodity sensitivity and less
exposed than other regional markets to the downside effects of
rising U.S. interest rates, greenback strength and potential
Rising interest rates should also benefit local banks' net
interest incomes: three of Australia's "big four" banks raised
their lending interest rates this month.
Credit Suisse predicts ASX 200 companies' profits to rise by
between A$10 billion to A$100 billion in 2017, with 32 percent
of the rise coming from commodity producers, 30 percent coming
from industrials, 17 percent from the big four banks and 21
percent from other financials.
Australian stocks are up 12.3 percent this year, compared
with the average fall of 0.3 percent for Asia-Pacific markets,
according to StarMine. Analysts predict the share price rises
will continue and the ASX will reach 7,000 by the end of next
year, with corporate earnings growth being a key driver.
(Editing by Sam Holmes)