Melbourne: Australia’s national carrier, Qantas Airways Ltd, upset investors with an uncertain outlook, dashing hopes for a resumption of dividends and sending its stock skidding to a two-month low.
Qantas first-half net profit fell 72% as it slashed fares to fill planes. But Thursday’s result was less of a disappointment than the accompanying outlook and the decision to keep skipping dividends until profits took off again.
“Qantas is strategically being cautious in what they say to the market about the outlook as there are a reasonable number of moving parts,” said Angus Gluskie, portfolio manager at White Funds Management.
Qantas shares fell by as much as 8% after the results, touching A$2.73, its lowest since 18 December, while the benchmark market index lost 0.5%.
Gluskie said the overall picture was brightening for Qantas shareholders with traffic and airfares on the rise as the economy and employment recover.
“If people look at what’s driving their earnings, those factors are moving in their favour,” he added.
The airline industry is recovering from its worst downturn last year. This month, Qantas peer Singapore Airlines said it was on course to avert a full-year loss as a recovery in passenger and cargo helped it report its strongest quarterly profit in almost two years.
Qantas profits came in within the airline’s own forecast range but were at the lower end of estimates of analysts, some of whom were also expecting the dividend to be reinstated.
The airline said it had seen some signs of improvement by the end of the second quarter, but increased fuel and depreciation costs would be felt in the second half.
“Remaining uncertainty in the economic outlook -- particularly in international markets, industry capacity, passenger and freight demand and high levels of volatility in fuel prices and exchange rates -- continues,” Qantas said.
The stock’s slump on Thursday hands back a large chunk of its nearly 11% rise over the past six months. The rise was more than four times the gain in the broader market, on investor hopes Qantas was primed for a pick-up in business and holiday travel.
Qantas expects underlying profit before tax for the full year of A$300 million ($269 million) to A$400 million, assuming no more major changes in market conditions and fuel prices.
Underlying profit before tax rose to A$267 million in the first half, with an accounting change adding an extra A$78 million, while statutory net profit before tax in the half was A$90 million compared with an outlook of A$50-A$150 million.
Net profit after tax fell to A$58 million ($52 million) for the six months to December from A$210 million a year ago.