Companies struggling to insulate earnings from higher input costs or provide guidance for future profits have weathered share price declines.
Investors have punished companies that proved vulnerable to rapidly rising raw material and other input costs or unwilling to provide profit forecasts in the busiest week yet for full year earnings.
Two overarching themes dominated the week. Investors remained eagle-eyed for any signs companies have struggled to pass on higher input costs with inflation touching 6.1 per cent in the June quarter, well above the 3 per cent upper limit of the Reserve Bank’s target. The market also punished businesses that failed to offer guidance on expected profits for the 2023 financial year.
, including for raw materials such as aluminium. The company passed on $2.2 billion of cost increases during the 2022 financial year and lifted profits 6 per cent but still warned that inflationary pressures would continue. The shares fell 1.2 per cent following the results on Thursday. Other companies were also able to display the ability to pass through rising costs effectively. Treasury Wine Estates was another company rewarded by shareholders for delivering consistent profits and showing it can manage higher input costs by raising prices. The company’s shares rose 4 per cent on Thursday when the business released its results, the second-best performance for a blue chip on the day.
“The Australian season seems to be following a similar trajectory to the US reporting season in July, where there were some generally good results but a tempered forward outlook,” said Mr Hannah of VanEck.
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