BILLABONG TAKES A BREATH AFTER 15% PROFIT DROP

Written on the 30 March 2010

BILLABONG TAKES A BREATH AFTER 15% PROFIT DROP

BILLABONG International has recorded a 15 per cent decrease in net profit to $69.7 million in the first half - down from $82.4m on the corresponding period.

US consumer caution and fluctuating currencies has led to revenue falls of $87.4 million to $723.6m. The US equates to 50 per cent of company revenue.

Billabong CEO Derek O’Neill told goldcoastbusinessnews.com.au, that despite a difficult global retail landscape, the Gold Coast’s No.1 company was still able to perform in line with guidance. However, currency was the rogue set to have hammered global sales.

“We could not have had a worse year in currency, I have been CEO for seven years now and I have watched currency erode overseas sales,” he says.

“The Aussie dollar will remain buoyant and from the profit translation side, obviously the rising dollar makes it look worse than the year before. Opportunity becomes relevant by June 2010/11 with the benefit of buying with a stronger Australian dollar.”

Billabong experienced strong growth in European territories, including Germany (double digit growth) and central European countries, while Australia had sales growth of around 4 per cent compared to the corresponding period.

But In Spain the company recorded a double digit decrease in sales.

“We operate around the world and running out and buying a t-shirt when you’re worried about your job is not a strong priority,” says O’Neill.

“In North America there were some signs of improvement in the company’s own retail operations, but business remained relatively challenging at the wholesale account level.”

Billabong shares, which had outperformed the market this year, fell 3 per cent to $10.31 in early trading today, before steadying to $10.60.

“It’s a difficult result to digest but over a period of time, shareholders will be comforted by the fact that we’re a global brand and that we have a strong balance sheet. I never worry too much about the share price. (But) we are long way off our highs and we still have some work to do.”

Billabong reaffirmed its full year guidance of 5 per cent NPAT growth or 10 per cent currency growth.

O’Neill predicts organic growth over the next 12 months.

“We will be opportunistic as things arise, but don’t plan any acquisitions in the short-term,” he says.


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