If you need proof that the chaos on financial markets has spread to the real economy, then look no further than yesterday’s avalanche of bad news. The automotive, food and beverages, building and media sectors are showing clear signs of deterioration as t
If you need proof that the chaos on financial markets has spread to the real economy, then look no further than yesterday’s avalanche of bad news. The automotive, food and beverages, building and media sectors are showing clear signs of deterioration as the downturn intensifies.
It started with Ford Australia which, as expected, cut its workforce by 450 after announcing 350 job cuts just two months ago. On top of this, Ford will introduce five non-production days in November to December so that production matches slowing sales. It also says another five forced days-off could be needed if sales continue to tank.
The impact of these cuts will be felt throughout the automotive industry, with the Australian Manufacturing Workers Union warning that nine jobs could be lost in the parts supplier sector for every one job cut at Ford.
There was also more bad news from publically listed companies, just a day after Rio Tinto warned that slowing growth in China would force it to examine its spending plans and project timelines.
Coca-Cola Amatil reaffirmed its forecast of 7% growth in earnings before tax in the six months to 31 December1, but warned that any fall in consumer demand over the crucial November and December period – which accounts for 25% of annual earnings – could affect the company’s full year earnings.
Chief executive Terry Davis said demand has been patchy, and there is evidence more consumers are eating and drinking at home rather than going out.
Building materials and sugar conglomerate CSR became the latest building materials company to issue a profit downgrade. It says weakness in the Queensland, New South Wales and New Zealand housing markets has hit demand. After earlier predicting profit would rise between 5% to 10% in the year to 31 March 2009, CSR now expects zero growth.
CSR chief Jerry Maycock says the benefits of a boost in building activity from the Federal Government’s decision to triple the first home-owners grant for new homes would not be seen until next year.
Finally, Australia’s third largest television broadcaster Ten Network has posted a 25% fall in annual profit for the 12 months to August as advertising revenues weakened in the last three months of the financial year.
Ten Network chief Nick Falloon declined to give guidance for next year’s profit, saying it is “impossible to predict what will happen”.
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