Adsteam Earnings Shunted Backwards
Sydney Morning Herald
Friday June 29, 2001
Tug boat operator Adsteam Marine has joined the growing horde of companies to warn that a slowing economy would cut this year's earnings, triggering a savage response by the market.
Adsteam shares dropped 34c, or more than 15 per cent, to $1.90 yesterday, the stock's lowest point since the start of April last year.
The company endured a fall in work in key regions during May and June, leading it to predict net profit in the year to June 30, 2001, would fall below the $17 million earned in the previous year. Analysts immediately chopped their full-year figures to $16 million, from forecasts as high as $21 million previously.
In the past few weeks some of the sharemarket's leading stocks have announced profit downgrades: Brambles, Telstra, Coles Myer, AGL, Lend Lease, and Goodman Fielder among them.
The main problem areas for Adsteam were fewer coal vessels in NSW, poor grain movements in Western Australia, and a broad weakening in container trade. The company also blamed higher financing costs arising from a $90 million investment in Alaskan shipping company Northland and the purchase of Howard Smith's towage operations in March for $500 million.
``Normally softness in one area would be offset by strength elsewhere," said managing director Mr David Ryan. ``This is the first time in my experience it hasn't happened. But I don't think there is a long-term trend here."
Despite the weak result, Adsteam reaffirmed a forecast made in March that it would declare a final fully franked dividend of 8c a share in August.
Although Adsteam made no reference to earnings in 2001-02, analysts clipped their net profit forecasts again, this time from about $40 million to nearer $37.5 million. ``You'd have to say there is a questionmark over next year's earnings, given the extent of this year's downgrade," said one.
Adsteam forecast annual pre-tax earnings would rise 25 per cent; 40 per cent before accounting for depreciation and amortisation. But analysts noted the big gains were due to acquisitions and these would weigh on the balance sheet.
However, Mr Ryan defended the company's decision to pay $500 million for Howard Smith's tugs business. He said the company paid a comparatively low price for the operation in light of two recent international deals: the Port of Singapore's acquisition of Sembawang Marine and AP Moller's purchase of Wijsmuller in Europe.
© 2001 Sydney Morning Herald
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