ASX-listed companies just posted their strongest profits since the GFC

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  • Companies, during the 2018 reporting season, posted their strongest profits since the GFC.
  • 77% revealed higher profits than a year ago.
  • And 86% either increased dividends or held them constant.

Three-quarters (77%) of ASX-listed companies posted higher profits this reporting season, their strongest result since before the GFC.

And this year 86% of them increased dividends or held them constant, with 62% of companies seeing their share price outperform the market on the day results were released.

Shane Oliver, Head of Investment Strategy and Chief Economist at AMP Capital, described the results as solid but not spectacular.

The result:

Overall earnings growth came in around expectations for an 8% increase, with resources earnings up 25% due to solid commodity prices and rising volumes.

The rest of the market saw profit growth of around 5% with bank profits seeing a 2% fall contrasting with strong profit gains for insurers, health care, gaming and utility stocks.

“It’s not the 28% earnings growth being seen in the US but it’s still solid,” says Oliver.

“Key themes have been continuing strong dividend payments, some pressure from higher raw material costs, outperformance by high quality offshore exposed companies and softer than expected guidance.

“Profit growth this financial year is expected to slow to around 5% as the growth in resource profits slows further.”

ASX200

According to CommSec, most (93%) ASX200 companies reported a profit, a near record, and 90% of them paid dividends.

Source: CommSec

Almost 62% increased profit, just above the 61% average.

In the ASX200 index, 139 companies with a June 30 reporting date issued full-year results while 31 companies with a December 31 reporting date issued half-year results.

In aggregate, revenue rose by 7.4% on a year ago, expenses were up by 7.6%, profits lifted by 8.4% and dividends rose by 13.6%.

“While corporate profits continue to rise, this disguises the challenges beneath the surface,” says CommSec.

“The Australian economy continues to be more global. Consumers can buy goods wherever they are and whenever they want. Businesses are more challenged by global firms but can also tap more global opportunities. Workers and supplies can be accessed locally or abroad. And costs continue to lift.

“The Australian economy has strengthened over the past year and that is expected to continue in the coming year. But home building will be less of a driver. Consumer spending may provide more of a contribution to growth with business investment.

“Certainly economic growth will be supported by a broad array of infrastructure projects across the country, supporting prospects of construction, industrial and transport sectors.

“For resource companies the global outlook remains positive, but the trade wars bear watching together with rising costs.”

CommSec says the Australian sharemarket is no longer cheap with the price-earnings ratio at 17, above longer-term averages near 15.5.

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