Company Profits in Australia Rise 3.9% as Earnings at Miners, Banks Gain

Australian business profits advanced for a second straight quarter, as earnings at miners, manufacturers and banks gained.

Gross operating profits rose 3.9 percent in the three months through March from the previous quarter, when they climbed a revised 3.2 percent, the Bureau of Statistics said in Sydney today. The median estimate of 19 economists surveyed by Bloomberg News was for a 3 percent gain.

The report underscores the central bank’s view that the nation’s economy is rebounding from the 2009 global recession. Policy makers have boosted the benchmark interest rate six times in seven meetings to help keep prices under control. A separate report today showed inflation accelerated in May to the fastest annual pace since October 2008.

“Stronger demand and continued cost cutting by firms” is helping stoke corporate earnings, Warren Hogan, chief economist at Australia & New Zealand Banking Group Ltd., said ahead of today’s report. “Next quarter should see an even larger rise” thanks to higher iron ore and coal exports, he said.

Profits declined 1.3 percent in the first quarter from a year earlier, today’s report showed.

Commonwealth Bank of Australia, the country’s largest lender, said this month that fiscal first-quarter earnings climbed 30 percent as charges for soured loans fell in an improving economy.

Borrowing Costs

Wesfarmers Ltd., Australia’s second-biggest retailer, said last month that sales at its Coles supermarkets rose 4.9 percent.

Still, there are signs that earnings are slowing at companies that are vulnerable to higher borrowing costs, after central bank Governor Glenn Stevens increased the benchmark lending rate to 4.5 percent this month from a half-century low of 3 percent in early October.

Those moves have taken rates paid by most lenders to an “average” level, Stevens said this month, a signal the bank may pause its interest rate moves in coming months.

Virgin Blue Holdings Ltd., Australia’s No. 2 carrier, cut its profit forecast last week on a “rapid deterioration” in leisure travel and rising industrywide capacity.

All 22 analysts surveyed by Bloomberg News late last week predict policy makers will keep the benchmark rate unchanged tomorrow at 2:30 p.m. in Sydney.

Profits at mining companies climbed 9.2 percent in the first quarter, manufacturers advanced 16.8 percent and banks and insurers surged 47.3 percent today’s report said.

Inventories held by companies rose 0.5 percent. Economists forecast a 0.5 percent increase.

Gross operating profit measures earnings before tax, interest, depreciation and amortization. It excludes asset sales and foreign-exchange gains or losses.

To contact the reporter for this story: Jacob Greber in Sydney at jgreber@bloomberg.net

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