Fuel-price rises and the stronger Australian dollar will take 12% out of soda ash maker Penrice“s expected profits in 2006.
Penrice told the stock exchange on 10 May 2006 that its full-year earnings…
Fuel-price rises and the stronger Australian dollar will take 12% out of soda ash maker Penrice“s expected profits in 2006. Penrice told the stock exchange on 10 May 2006 that its full-year earnings would be 12% below its prospectus forecast of AUD 10.2 million. “The main reasons for this profit revision are the recent extraordinary changes in both exchange rates and fuel costs”, the company said in a statement. “Delays in the commissioning of the sodium-bicarbonate expansion and the reverse-osmosis plant and sales volumes below expectations have exacerbated these issues”. Penrice is the only Australian producer of soda ash for glass making. As most of Penrice“s sodium bicarbonate is exported, the USD 0.07 jump in the Australian dollar in the past six weeks has hit the company hard. Secretary Stephen Bushaway said the company was unhedged in relation to the US dollar because the Australian dollar had been predicted to fall from about USD 0.77 in late 2005 and it was impossible to get a hedge at forecast prices as low as USD 0.68. The rise of the Australian dollar in April 2006 then dealt a blow to the company“s forecasts. Fuel price rises have pushed up running costs at Penrice and its customers. An increase in sales volumes in the 2H was not sufficient to counter these effects. Mr Bushaway said full-year earnings before tax, depreciation and amortisation would still be about 10% above the figure for 2005. The company expects to maintain its full-year prospectus dividend of AUD 0.147 per share “subject to there being no further deterioration in the exchange rate and fuel price”.