Supermarket giant Woolworths has downgraded its earnings guidance for the 2011 financial year, although it recorded sales growth of 4% for the first six months of the year, it announced today.
The company said that total sales for the group rose from $27.2 billion to $28.3 billion from the previous corresponding period. However, it has cut net profit growth guidance to a range of 5-8% from a range of 8-11% due to the uncertainties presented by the Queensland floods.
“Woolworths operations have experienced two significant natural disasters, an earthquake in New Zealand and the recent floods in Australia,” the company said in a statement.
“The majority of the financial impact incurred by Woolworths will be covered by its insurance policies although there will be costs that are not covered.
“These costs not covered by insurance policies are the excess relating to individual policies and items not covered under normal insurance policies in these extreme natural disasters. Given the complexity of these insurance claims a clear view of these costs could take many months to complete and will impact in the second half.”
Food and liquor sales grew by 3.5% to $18.8 billion, with same store growth of 2.5%. Big W sales fell by 2.8% to $2.46 billion, although the company has said its position in the market remains strong despite lower spending.
“We are in a unique position because of our strong growth over the past 20 years that was accelerated with the government stimulus payments,” chief executive Michael Luscombe said.
“This means we are still hurdling our strong results in a very challenging climate.”
The producer price index rose by 2.7% in 2010 according to new figures released by the Australian Bureau of Statistics.
In December the PPI rose by 0.1%, well under expectations for a 0.5% rise. During the quarter, the PPI was flat but rose by 0.1% during the preliminary stage.
During the year to December, the PPI was during the intermediate stage by 3.3%, with a 3.8% increase during the preliminary stage.
The Australian share market has opened flat this morning, following a disappointing performance from Wall Street and European stocks late last week.
The benchmark S&P/ASX200 index was up five points or 0.12% to 4761.3 at 12.10 AEST, while the Australian dollar opened stronger at $US98c.
AMP shares gained 0.6% to $5.10, while Commonwealth Bank shares rose 0.7% to $52.01. Westpac gained 0.7% to $22.21 as NAB gained 0.6% to $24.47.
Riversdale Mining directors have backed a $3.9 billion takeover offer from mining giant Rio Tinto.
“The directors consider that the offer by crystalising value now for the company’s shareholders’ investment in Riversdale provides an attractive alternative to holding their Riversdale shares until the major assets of Riversdale – the Benga project and the Zambeze project, both of which are located in Mozambique – come into full production,” Riversdale executive chairman Michael O’Keefe said in a statement.
“Taking these projects from their present pre-production status into full production will take a number of years; it will involve very material capital expenditure and it will be subject to significant risks and uncertainties.”
Patrick Stafford is a freelance journalist and a former deputy editor of SmartCompany.
