Aug. 21 (Bloomberg) -- Billabong International Ltd., Australia’s biggest surfwear maker, fell the most in three months after posting earnings that missed some analyst estimates.

Billabong shares fell 5.1 percent to A$9.67 at the 4:10 p.m. market close in Sydney, their largest decline since May 20. Today’s decline pared the stock’s gain this year to 29 percent.

Net income fell 13 percent to A$152.8 million ($127 million) in the fiscal year ended June, the Gold Coast, Australia-based company said today, missing the A$158.5 million average of six analyst estimates compiled by Bloomberg.

Slumping demand in the U.S. and discounting at home is cutting profitability in Billabong’s largest markets as the company also battles a rising Australian dollar, which is lowering the value of overseas sales. Chief Executive Officer Derek O’Neill said next year’s result will be “flat” compared with its 2009 operating profit of A$160.2 million.

“Billabong’s result was weak with pressure across both the Americas and Australasia,” Craig Woolford, an analyst at Citigroup Inc., said in a note to clients today.

“We expect margins to show some recovery over the next two years, but more tangible signs of improved demand are required to be confident about the outlook,” said Woolford, who retained his “hold” rating on the stock.

Currency Loss

The Australian dollar’s 8.6 percent rise against its U.S. counterpart since May 18 cut almost A$3 million from earnings, Billabong said.

Second-half earnings before interest, tax, depreciation and amortization in the Americas fell 7.6 percent to A$59 million.

Annual sales in the Americas rose 35 percent to A$836.8 million on the company’s purchase of surf accessories maker DaKine Hawaii Inc. Excluding acquisitions, sales from the Americas fell 13 percent.

Billabong’s margin in the Americas, which measures earnings as a proportion of sales, fell to 11.9 percent in the past year from 18.1 percent in 2008.

Earnings at the company’s Australasian division, which includes Australia, New Zealand and Asia, fell 22 percent to A$30.8 million. The margin in the region fell to 22.6 percent from 26.7 percent.

European earnings rose 16 percent to A$43.6 million.

To contact the reporter on this story: Robert Fenner in Melbourne rfenner@bloomberg.net

Last Updated: August 21, 2009 03:26 EDT