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ASX 200 market wrap: BHP and Coles results in focus

We look at two of Australia’s most important earnings releases from Tuesday, 18 August.

ASX 200 finishes Tuesday strongly

While the ASX 200 started off Tuesday slowly, optimism looks to have improved throughout the day, with the Australian benchmark finishing out the session up 47 points or 0.77%, at the 6,123 point level.

Elsewhere, with Australia’s corporate earnings season now well under way, below we look at two key earnings results you may have missed, from Tuesday, 18 August.

BHP share price falls, full-year dividends come in lower

BHP Group (BHP) reported a consistent set of full-year results on Tuesday, though saw its stock come off slightly, closing out the session down around half a percent.

Overall, the mining giant reported slightly lower revenues (US$42,931 million, -5%), profits (US$7,956 million, -4%), and dividends (120 US cents per share, -10%).

On a more granular level, with iron ore prices confidently trading above US$100 per tonne in recent times; unsurprisingly some 64% of BHP’s earnings (EBITDA) were derived from the miner’s iron ore segment, for the full-year. By comparison, copper accounted for 19% of Group EBITDA, metallurgical coal 9% and petroleum 10%.

In spite of moderately lower earnings overall, the Group’s Chief Executive, Mike Henry described the FY20 results a strong, saying they reflected 'the strength, resilience and quality of our people and our portfolio.’

Income focused investors may have been disappointed by the Group’s slightly lower full-year dividend however, which came in at 120 US cents per share, against 133 US cents per share from the year prior.

Analysts from Macquarie were impressed by the miner’s results, maintaining their Outperform rating on BHP. In saying that, the investment bank noted that although ‘Net debt is now at the bottom end of the range, […] BHP did not launch any new capital management programs or materially boost the dividend.’

BHP Group currently has a market capitalisation of $117.42 billion.

Coles share price dips, Covid-19 pushes sales higher

The Coles Group (COL) share price fell after the food and groceries-focused retailer released its full-year (FY20) results to the market.

Despite that intraday price weakness, Coles posted strong growth across the board, on a year-over-year and pre-AASB 16 basis, reporting:

  • Sales revenue of $37,408 million, up 6.9%
  • Earnings (EBIT) of $1,387 million, up 4.7%
  • Profits after tax of 951 million, up 7.1%
  • Gross margins of 25.1%, up 30 basis points
  • A final dividend of 27.5 cents per share, up 14.6%, bringing the Group's full-year dividend to 57.5 cents per share for FY20

In saying that, while the Group experienced strong top and bottom-line growth as a result of the pandemic, costs also rose in step as a result of Covid-19 – with operating costs hitting $170 million in Q4 alone. Overall, costs of doing business (CODB) – represented as a percentage of sales, hit 21.1% (+16 basis points) in FY20.

Commenting on these results, the Coles CEO, Steven Cain said:

'For our many shareholders, we have successfully executed the first year of our strategic plan, restored group profit growth for the first time in four years, and are on track to grow long-term shareholder value.’

Elsewhere, analysts from Citibank were impressed by the Group’s results, retaining their Buy rating and $21.40 per share price target – implying modest upside from current price levels. Analysts from Citi argued that ‘We expect small consensus revisions as better LFL growth is offset by a continuation of incremental COVID-19 costs into FY21e.’

Coles Group currently has a market capitalisation of $25.25 billion.

ANZ, Crown, EML Payments, Domino's, a2 Milk and Tabcorp are all set to report their latest set of earnings on Wednesday, 19 August.

This information has been prepared by IG, a trading name of IG Australia Pty Ltd. In addition to the disclaimer below, the material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients.

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