Welcome to Talking Business, a podcast produced in Melbourne Australia. The podcast is available on the Acast app, the Apple Podcast store or wherever you go to get your podcasts. Or you can get it at the Business Acumen website at www.businessacumen.biz.
I am Leon Gettler. My job is to review and monitor the week’s news in business, finance, and economics. I bring it all to you, every week.
This is episode number thirty-one in our series for 2019 and today’s date is Friday August 30.
First I’ll be talking to Dan Springer, the CEO of DocuSign with its distinctive eSignature business. While environmental benefits are part and parcel with DocuSign’s product offering for over half a million customers worldwide, Dan’s personal interest in and commitment to philanthropy in the area of environmental causes pushes him to take the company’s corporate social responsibility pursuits to the next level.
And then I’ll be talking to AMP Capital chief economist Shane Oliver reviewing the profit reporting season. It’s a softer profit season, reflecting the state of the economy and global uncertainties.
But first, let’s talk to Dan Springer.
Donald Trump has triggered a wave of confusion about China, but the trade war continues. First, at the G7 meeting. Trump poured more petrol on the blaze by saying he regretted taking harsh measures. Then his people told the press he only wished he had raised the tariffs higher.
It was a head-spinning about-face. The confusing change reflects Trump’s wildly shifting approach to China, which has had a major effect on the U.S. economy and could affect his re-election chances next year. Then, the next day, Trump insisted talks had restarted with China, but details remain elusive. “We’ve gotten two calls and very, very good calls,” Trump told reporters here at the Group of Seven summit. “Very productive calls. They mean business. They want to be able to make a deal.” Trump later clarified that the calls had occurred as recently as Sunday evening.
Other administration officials were more circumspect, and it wasn’t clear how substantive any interaction had been. Chinese officials didn’t confirm the major progress Trump had cited. Chinese Foreign Ministry spokesman Geng Shuang said he was “not aware” of any such phone calls with Trump. For more than a year, Trump has insisted that China needs to make major structural changes in its practices, particularly related to intellectual property, government subsidies, and currency.
He has also pushed Beijing increasingly to purchase billions of dollars in U.S. farm products, something his advisers hope will give him a political boost domestically. It wasn’t clear precisely why Trump believes a deal with China is finally close. He has made such statements before, only to attack Beijing days or even hours later. Trump has seen his poll numbers sag ahead of his 2020 re-election bid, as consumers sour on his aggressive trade stance against China. Trump has bet his re-election chances on a strong economy, and with fears of recession growing among some economists, he has insisted fears of an economic slowdown are overblown.
With the trade war between the United States and China spiraling, and world leaders gathering in the G7 summit. Australia’s central bank governor Philip Lowe has issued a stark warning that there is only limited capacity to protect the global economy from “a period of major political shocks”. Lowe used a contribution at the closing session of a retreat for central bankers in Jackson Hole, Wyoming, to argue that political shocks, like the trade dispute which imperils global growth the turbulence created by Brexit, and protests in Hong Kong were “turning into economic shocks”.
Dr. Lowe criticised the global rush to lower interest rates as ultimately counterproductive but acknowledged the lack of political stability was making the pressure difficult to resist. The RBA governor said central banks could not neutralise political instability. Lowe said infrastructure investment and structural reform in economies around the world would have more impact than cutting interest rates, but “with these three levers stuck, the challenge we face is monetary policy is carrying too much of a burden”.
While Dr. Lowe refrained from mentioning Donald Trump by name, he referred to Friday’s tumultuous market turmoil unleashed by the President’s extraordinary attacks on the US Federal Reserve boss, who he suggested maybe a bigger “enemy” than Xi Jinping, and a bizarre demand that US companies withdraw from China. The President’s tantrum against Fed chairman Jerome Powell stunned many participants at the annual three-day Jackson Hole symposium over the weekend.
At the same time, IMF chief economist Gita Gopinath has acknowledged that the fast-escalating economic and trade battle between the US and China may be reaching a point of no return and that Australia could face “significant” impacts. Professor Gopinath warned that global growth was sluggish “and the outlook is precarious” but doesn’t believe a recession is imminent, despite yet another inversion in the benchmark US yield curve over the weekend. Speaking on the sidelines of the US Fed’s annual Jackson Hole symposium, which was heavily overshadowed by President Donald Trump’s war of words against Fed chairman Jerome Powell, the International Monetary Fund’s research department head questioned whether global central banks can shield the world from a downside.
Budget cuts risk driving Australian government investment in productivity-boosting research to among the lowest levels in the developed world according to global figures. This contrasts with Treasurer Josh Frydenberg’s call for business to forego share buybacks and special dividends, and instead invest in innovation to help grow their companies. Mr. Fydenberg has angered business leaders. The Coalition has slashed $4 billion from research and development (R&D) tax incentives in the past two federal budgets while clawing back millions of dollars in previously approved claims.
An analysis of Organisation for Economic Co-operation and Development (OECD) figures shows sharply falling government incentives are already well below those of Slovenia and Greece. Australia fell from 114 to 107 in 2017-18, according to an OECD index of R&D investment by government. The index, measured through purchasing power parity, is expected to drop again once a 2019 budget cut of $1.3 billion comes into effect, taking Australia further below Mexico and the Netherlands, which scored 134 and 114 respectively. The cuts have helped drive Australia’s overall R&D investment below that of Europe, China, the United States, South Korea, and Japan.
Some two-thirds of women working in science, technology, engineering and maths (STEM) careers say their views or voices are devalued because of their gender, while 40% have borne the brunt of sexist jokes or offensive comments, a survey has found. The survey by the Males Champions of Change advocacy group also found that nearly half of women working in STEM sectors had experienced role stereotyping over the past two years and nearly one-third reported a preoccupation with physical appearance. As a result, 54% of the women surveyed said they had considered leaving their STEM role, against 45% of men. The results raised concerns that the gender equality gap would be widened, given the increasing importance of STEM occupations, while innovation efforts could be stymied.
A slew of Australia’s largest infrastructure assets, including airports, docks, and a train station, have set carbon emissions reduction targets for the first time as part of a coordinated push led by industry superannuation fund manager IFM Investors. The targets set by Melbourne Airport, Brisbane Airport, Ausgrid, NSW Ports, Port of Brisbane, NT Airports and Melbourne’s Southern Cross Station aim to eliminate 200,000 tonnes of carbon emissions annually by 2030.
IFM Investors, which manages funds on behalf of industry super funds, said the emissions reductions across all its major local assets was the same as removing almost 70,000 cars from the roads. IFM has a major stake in each of the assets, worth a combined $10 billion, and drove what it says is an “unprecedented” initiative over concern that climate change and associated severe weather events would damage those investments over the long term. The assets will work together on methodology through the term of the short-term targets, while IFM says it will reassess their targets and hold them accountable through its representatives on each of their boards. The reductions will be achieved through a combination of solar generation, building, lighting and transport efficiency, and other energy efficiency projects.
The burden of mortgage debt is leading to mental distress and worsening mental health outcomes for older Australians, who are now often carrying unsustainable mortgage repayments into retirement, a new study has found. Average mortgage debt among older Australians has blown out by 600% since the late 1980s after accounting for inflation, the study says, and nearly half of all homeowners aged 55 to 64 are still paying off a mortgage, up from just 14% 30 years ago, according to the Australian Housing and Urban Research Institute (AHURI) study. Foodbank South Australia has been approached by banks wanting to refer their clients to the charity, in the hope it will prevent people from defaulting on mortgage payments.
Oil and gas giant BP has announced a partnership with David Jones that will see sushi and rotisserie chooks made available in selected petrol stations. Over the next six months, BP will transform five petrol stations each in Sydney and Melbourne to exclusively stock products from David Jones Food. The new range will feature over 350 products, including food-for-now and food-for-later options as well as fresh items like sushi, sandwiches, free-range rotisserie chickens, pre-prepared meals and long-life groceries. BP has eight major partnerships around the world similar to the David Jones deal, including with retailer Marks and Spencer in Britain.
And the profit reporting season continues.
Wesfarmers reported earnings before interest and tax of $2.97 billion led by hardware powerhouse Bunnings with $1.62 billion compared to $1.5 billion last year.
Electricity networks owner Spark’s net profit sank 9.1% to $52.8 million in the six months ended June 30, while underlying net profit dropped 12.2% to $51.1 million.
Caltex Australia has posted a 54% drop in benchmark profit for the first half, with bottom-line net earnings dropping to $155 million in the six months ended June 30, from $383 million a year earlier.
Embattled wealth manager IOOF’s profit was down 67.7% to $28.6 million. On an underlying basis net profit after tax was up 3.4% to $198 million, after taking into account the spike in customer repayments.
Viva Energy’s first-half net earnings fell 51.3%, weighed down by difficult conditions in refining and weak retail margins. Underlying net profit totaled $78 million for the six months ended June 30, down from $129.6 million a year earlier.
Boral’s revenue edged 0.1% lower to $5.86 billion in financial 2019, and bottom-line net profit after tax fell 38% to $272.4 million. Boral trimmed its final dividend payout to 13.5¢, from 14.0¢ a year ago. Fortescue posted a better than expected $US3.18 billion profit.
oOh!media reported a net profit after tax of $9 million for the first half of calendar 2019, down from $12 million in the same period last year. Wealth manager Evans Dixon has reported full-year underlying earnings of $37.1 million, down 26% as lower revenues in its advice and funds management division weighed on the group.
Homeware retailer Adairs sales rose 9.4% to $344.4 million in the 12 months ending June, earnings before interest and tax slipped 4% to $43.4 million.
Southern Cross Austero’s audio business, including radio and podcasting, revenue was up 2.4% over the 2018-19 financial year to $453.4 million. Earnings before interest, tax, depreciation and amortisation inched up 0.6% to $148.6 million for the segment.
Childcare services provider G8 Education reported underlying earnings before income and tax of $51.6 million for the six months ended June 30.
Australia’s biggest mobile virtual network operator Amaysim’s earnings before interest, tax, depreciation and amortisation was down 14.5% to $47.3 million. Earnings in the mobile business plummeted 51.3% to $15.2 million. Earnings in the energy business were up $33.2 to 24.1 million, artificially boosted by a new accounting standard.
Plumbing fittings group Reliance Worldwide posted a net profit after tax of $133 million, up from $66 million for the 12 months ended Jun3 30.
Superloop has announced a full-year loss of $72.1 million resulting from a major write down and will pay no final dividend.
Plus-sized fashion chain City Chic Collective has posted a 25% increase in underlying earnings fuelled by strong online sales growth and the opening of new brick-and-mortar stores in Australia.
Biotech company Nanosonics announced a 137% increase in post-tax profit to $13.6 million, beating expectations of a $9.8 million profit.
Satellite communications provider Speedcast announced a $US175.5 million ($260 million) statutory first-half loss due to a $US155 million ($230 million) write-down in the goodwill of its non-Government segment.
ASX-listed poultry provider Inghams announced a 10% in net profit for 2019 to $126 million.
Northern Star recorded net profit after tax of $154.7 million for the year to June 30, compared to $194.1 million in 2017-18.
SeaLink’s net profit after tax for 2018-19 rose to $21.5 million from $19.6 million.
Specialist investment platform Hub24 reported an underlying net profit after tax of $6.8 million for the 2019 financial year, a 27% increase on the previous year.
A2B Transport, the company formerly known as CabCharge, swung to a net profit after tax of $11.8 million.
LiveTiles posted a loss after tax for the financial year of $42.77 million – this loss is 93% larger than FY18’s loss of $22.06 million.
Organic baby formula and snack maker Bellamy’s Australia’s earnings before interest, tax, depreciation and amortisation (EBITDA) plunged 47% to $34.9 million and net profit more than halved to $22.1 million.
Oz Minerals suffered a 65% fall in half-year profits to $43.9 million.
Afterpay went deeper into loss to support its growth, with after-tax loss of $42.9 million higher than $9 million a year earlier.
Virgin Australia reported a group statutory loss after tax of $315.4 million, which included a write-down for Tigerair and VA International, a $158.8 million hit from fuel and foreign exchange.
The Future Fund has delivered a strong annual return of 11.5% as its assets swelled to $162.5 billion at the end of the financial year.
And that’s it for this week. And next week I’ll be talking to Peter Nguyen-Brown, co-founder and executive director of independent software vendor LiveTiles. And I’ll be talking to CommSec chief economist Craig James looking at what’s ahead in the week for markets.
And of course, I’ll be bringing you all the week’s news. In the meantime, you can find me on Twitter at talkingbizz, on Facebook and on LinkedIn. And if you want, leave a comment. Have a great week, take care, be good and looking forward to bringing you Talking Business next week.