Reuters Australia
Babcock & Brown warns on FY profit, shares dive
Monday August 11, 08:41 PM
(Adds background, share closing price)
By Mette Fraende
SYDNEY, Aug 11 (Reuters) - Australian investment firm Babcock & Brown Ltd BNB.AX warned on Monday its full-year earnings would not beat last year's due to difficult market conditions, sending its shares down as much as 13 percent.
The company, which manages about A$72 billion in global infrastructure assets, has seen its shares tumble almost 80 percent this year, hit by worries over high debt.
Analysts said Babcock & Brown, whose market capitalisation has slumped to below A$2 billion from A$9 billion ($7.98 billion) at end-2007, had finally bowed to the inevitable.
"They are guiding down and trying to make its results more realistic ... it's not unexpected. Most people following this stock would have expected this," said Angus Gluskie, portfolio manager at White Funds Management.
In late-June, Babcock & Brown agreed to drop a clause which gave its lenders the power to review terms of a A$2.8 billion ($2.48 billion) corporate debt facility if Babcock's market value fell below A$2.5 billion.
In return, Babcock & Brown agreed to pre-pay some of the debt and pay a higher interest rate on the 3-year debt facility.
The company said on Monday its full-year 2008 earnings would not beat the A$643 million ($569 million) posted in 2007. It had previously predicted 2008 profit of around A$750 million, while a Reuters estimate of seven analysts expected A$670 million.
"With consensus for the full year at A$670 million, the market had anticipated a downgrade, albeit we are no closer to gaining comfort with CY09e forecasts," Citi said in a research note, referring to calendar year forecasts.
The group also said first-half net profit would be 25-40 percent below the year-earlier's A$250 million.
UNCERTAIN CONDITIONS
CEO Phil Green said in a statement that volatile global capital markets made business conditions uncertain, making it harder to forecast in the short term.
Babcock & Brown's shares fell as much as 13 percent to a 7-week low, and ended down 11.8 percent at A$6.00, in a wider market .AXJO that closed up 0.8 percent.
Many of Australia's major banks and financial firms are under scrutiny after National Australia Bank Ltd (ASX: NAB.ax) and Australia and New Zealand Banking Group (ASX: ANZ.ax) issued profit warnings, shaking confidence in their ability to weather the credit crunch.
Babcock & Brown said the cut in its profit outlook was primarily due to non-cash impairment provisions, particularly the revaluation of real estate assets, as well as other corporate and structured finance assets. It said more details should be given along with first-half results on Aug. 21.
Babcock & Brown, like bigger rival Macquarie Group Ltd MQG.AX, buys assets such as ports and utilities and bundles them into listed and unlisted funds from which it earns management fees.
The group has four operating divisions -- real estate, infrastructure and project finance, such as its Eurorail partnership with HBOS Plc HBOS.L, operating leasing and structured & corporate finance. (Editing by Ian Geoghegan and Louise Heavens)
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