Residential property slump hurts household products sector

The bad news continues for Australia’s residential property market, with Queensland-based developer Devine becoming the latest property company to slash its profit forecasts.

 

 

Devine expects profit after tax for the six months to 31 December to reach $11.6 million, up from $10.04 million from the previous year.

 

But Devine has slashed its outlook for the full financial year. It now expects earnings to be $23-$25 million in 2008-09. This is substantially less than the $36 million forecast profit the company provided at its annual general meeting last October.

 

But it’s not just builders suffering during the slump – building products and household good companies are also hurting.

 

Renovation and housing products group Alesco, which makes kitchen sinks and garage doors, yesterday reported a 60% fall in first-half profit. The company has put interim dividend payments on hold, citing consumer confidence and slowing construction markets.

 

Net profit fell for the first half from $31.5 million a year ago to just $12.6 million. Chief executive Justin Ryan says the company will focus on boosting cashflow and reducing expenditures.

 

“The world has changed: our earnings are coming down, debt is not available like it was, but we have the advantage of being a strong cashflow generator,” he told The Financial Review.

 

Building materials group Boral has also posted a profit downgrade, warning the housing industry may not recover for six months. Several analysts believe the company could also face write-downs from its United States operations.

 

The group’s shares lost 2.6% yesterday to $3.36 after a 15% drop on Wednesday.

 

GUD Holdings, which manufactures household products such as kitchen appliances, pool equipment, safe locks, security devices, cleaning products and filing cabinets, has posted a 3.4% decline in interim profit.

 

The group says revenue has fallen 3.1% to just $237.3 million, and has also reduced interim dividends to just 27 cents, down three cents from a year ago.

 

Profit has fallen 3.4% to just $16.9 million. The company blames lower demand for pool and spa products for the loss in revenue.

 

Fellow household appliances group Breville is also suffering falling profits.

 

The company says most of the drop-off is located in the US, meaning first-half profit could be down as much as $14.6 million on last year – a 10% decline. The group also says it will be forced to write down $1.6 million on inter-company loans.

 

“Demand for … small domestic appliances seems to have been softer in the North American markets in the latter part of the calendar year,” interim chief executive Mervyn Cohen said.

 

But despite the gloomy outlook, Ron Silberberg, managing director of the Housing Industry Association, says recovery should emerge towards late 2009.

 

“Look, it’s been a pretty tough first six months of the year, but we’re anticipating steps towards recovery in the second half of the calendar year. NSW could be the first state to come out of the downturn, and there are some tentative signs that there’s a bit more land being sold.”

 

“There’s prospect of further government stimulus for residential building. Now, that needs to focus on the rental investment sector to get things moving.”

 

“In terms of recovery prospects, you’re going to get further substantial reductions in interest rates, and an economic recovery plan should be helpful. The noises coming out of the government are positive – and remember, what comes down sharply can bounce back fairly quickly too.”

You can help us (and help yourself)

Small and medium businesses and startups have never needed credible, independent journalism and information more than now.

That’s our job at SmartCompany: to keep you informed with the news, interviews and analysis you need to manage your way through this unprecedented crisis.

Now, there’s a way you can help us keep doing this: by becoming a SmartCompany supporter.

Even a small contribution will help us to keep doing the journalism that keeps Australia’s entrepreneurs informed.

Trending

COMMENTS

Subscribe
Notify of
guest
0 Comments
Inline Feedbacks
View all comments