Listening to the big boys

We’re smack bang in the middle of corporate results season, that two-month period where publically-listed companies have to tell investors just how good (or bad) a year they have.

So far, there have been very few surprises – most big companies, with the exception of some firms in the struggling property sector, have done pretty well, all things considered.

For example, BHP Billiton’s net profit slumped 61.8% in 2008-09, although it still managed to post earnings of $7 billion.

Commonwealth Bank’s cash profit dropped from $4.7 billion to $4.4 billion, but given the rising level of bad debts that banks around the world have been dealing with, this was seen as a pretty impressive result.

And Telstra’s result, a 10% increase in profit to a tick over $4 billion, was pretty good, considering usage of its fixed line and mobile services falling.

But those profit results belong to the past. What commentators and analysts particularly look for in these profit results is comments on the outlook for the year ahead.

The message is clear: Things are getting better, but a long and slow recovery lies ahead.

BHP chief Marius Kloppers was particularly cautious, telling the market that underlying demand for its commodities is likely to be “obscured” by the fact that some countries are rebuilding their stockpiles of materials like steel – that is, don’t believe that just because sales are rising the economy is getting better.

“It is our view that the global economy is likely to emerge from this recession less rapidly than in previous cycles,” Kloppers said.

Telstra’s new boss, David Thodey is also worth listening to. Given Telstra’s dominance of the Australian market and his ability to monitor a key indicator of business activity – that is, phone calls made – he is in a unique position to get a read on the economy.

He was equally cautious about the prospects for growth, saying that Telstra is budgeting for “an extended period of slow growth”.

Over at Commonwealth Bank, chief executive Ralph Norris was even more downbeat, warning of a “second wave” of bad economic news as the painful process of deleveraging the world’s highly indebted banks continues. He’s also worried about what rising unemployment could do to bad and doubtful debts.

These companies come from very different sectors, but their message is the same. The recovery may be under way, but don’t expect the rapid return to boom-time conditions that some indicators – particularly consumer and business confidence – suggest.