As Australians' eating habit changes due to cost-of-living pressures, Coles CEO Leah Weckert explains the reason behind its $1.1 million underlying profit. Plus, July inflation data expected to ease, and Telegram founder arrested in France.
This is Business Now with Ross Greenwood.
It's great to have your company here on Business Now on this Wednesday.
I'm Ross Greenwood.
Coming up on the program today, it's a massive day for profit results. We'll hear from the chief executives of HP and Woodside, who shares both rows today off the back of their latest numbers. But there's also a warning from BHP about the government's new industrial relations regime the monthly inflation rate. That's how tomorrow we're mid warnings from the Reserve Bank to not presume interest rate increases or cuts in the future. One man who's consistently called for rate rises is economist Warren Hogan, who'll be with us today. And Cole's food sales are stronger as people eat at home more because of cost of living pressures.
But oddly though went drinking.
Less because of those same cost pressures. Cole's boss, Leah Weiker, will explain all that when we chat with her later in the program. So all that and plenty more coming up on today's program Now. Other stories I think you should know about today include there are fears today that China's economic downturn is worse than feared, as one of its most successful global retailers, called PDD Holdings said the profit and sales must inevitably slow. PDD owns the online retailer Timu, now the most downloaded free app in America, parts of Europe, the UK, Japan.
And South Korea who was launched here in Australia.
In April last year and by August overtook Amazon as the most downloaded free shopping app in Australia. Timu and its Chinese sister brand Pin Duo Duo is known for the cheapness of its.
Products and also the deals that it offers.
In China, consumers are struggling under the way to the massive property crash that hurt disposable wealth. But p to b D was expected to hold up because of the cheapness of the goods that it sells. But today's outlook smashed p d D shares, which are listed on Nasdaq in Shanghai and also in Shanghai. It shares immediately more than twenty eight sent in response to that downbeat tone. Now, Australia's homegrown naval shipbuilder Ostell has been penalized thirty five million dollars by the US regulators of a fraud allegations that date back to twenty thirteen to twenty sixteen. The agreed penalty follows an investigation by the Securities and Exchange Commission and also the Department of Justice, and the company will not admit or deny the fraud allegations. An independent monitor to the business will appointed be appointed for three years. It relates to former Ostell employees who allegedly misstated Ostele USA's performance and financial conditions in its statements. The Department of Justice in April twenty three announced the indictment of former Hostel US chief executive Trade Percyvel, Joseph Runkel, a member of the company's finance team, and William Adams, who worked on the Literal Combat ship program. Their trial is due to start in January next year. For Ostell, more important its ability to keep trading with its key clients, particularly the US Navy and the Coastguard. It's seeking an administrative agreement with the Navy to allow it to maintain its status as a responsible contractor to the US government.
But Ostale shares today.
They jumped off the back of this up by three and a half percent, and BHP the world's biggest diverse fied minors today said underlying profit increase two percent to thirteen point seven billion US dollars in the latest financial year. Revenue increased three percent off the back of stronger iron ore shipments which offset price falls, but net profit fell thirty nine percent to seven point nine billion US dollars due to two point seven billion dollar right down of its mothballed West Australian Nickel operations, plus a three point eight billion dollar charge for the Somaco dam failure in Brazil nine years ago. BHP's dividend was cut by twenty four US cents to a dollar forty six, a payout of a payout cut rather.
Of fourteen percent for shareholders.
Now.
I did speak earlier with BHP's chief e taking Mike Henry for Business wake In. He warns that the government's new Industrial relations regime threatens Australian costs and competitiveness.
You know, we've been clear and vocal for a number of years now about the need for Australia to maintain policy settings that enable it to compete globally. And we're not just focused here on the resources sector on BHP, We're talking about the economy more broadly. We recently released a report in this regard talking about the opportunity ahead for Australia, but for Australia to capitalize on that, it does have to have competitive policies in place that stimulate competitiveness globally. Now, if we look at our sector specifically, BHP has been very clear that we support rising wages to the extent that there's a link with productivity improvements. And our concerned about some of the policies that are being put in place right now is that they bring extra cost less flexibility and certainly no productivity improvement and that isn't a long term trend, but that trend isn't going to be good for Australia in the long term.
And the full interview with Mike Kendrew will be on Business Weekend this Sunday from eleven AM. Will also bring you a full wrap of this August profit reporting season with key interviews from this week as well. Let's get across today's markets with Ed Boyden. Let's start with BHP out of the market. React to that dividend cut and that profit pretty.
Well Actually ross PHP shares pop today it's back above forty one dollars a share, for the first time in about three weeks. Overnight, the price of iron or lifted to one hundred US a ton. That may have helped BEHP as well. Another major company to report today was Woodside, revenue slip nineteen percent in a half year due to commodity prices falling about eleven percent and production dropping two percent. The Scarborough project off the coast to western Australia is two thirds complete, and the Sangamar project off the coast of Senegal has begun producing oil. I spoke to Woodside CEO Meg O'Neil this afternoon and asked her about the rumor that US giant Chevron is interested in buying Woodside.
Look, I think it must have been a slow newsday to revive some rumors that have been floating around for a while. Look, we've got close relationships with a number of other companies in our sector, and as I said, our goal is to thrive as a standalone business.
And you can watch that full interview on Business Weekend this Sunday. But here's the share price reaction. Investors like the result. Woodside finished the day up just under four percent. Fast food retailer Guzman and Gomez reported its first profit results this morning. Remember it only listed on the stock market in June at an opening price of thirty dollars per year. GYG reported a statutory loss, but on an underlying basis, it posted a profit of just under six million. The Brito makers said breakfast sales have been strong, comparable sales growth in that category up eighteen percent.
GYG has beaten.
Its conservative prospectus forecasts and says in the first seven weeks of the new financial year, comparable sales growth is up seven point four percent. The shares they started in negative territory today, but they ended up finishing up three point two percent at thirty seven dollars. Nanosonix, which makes machines that disinfect ultrasound probes, it reported an increase in sales, revenue and gross profit. Was one of the best performers today on the market. IDP Education surged as well. Its results they're coming out later this week. Shipbuild Oste Well Ross has just recapped what's happened with them, seppling that core case in the US. They're going to pay American regulators about thirty five million dollars, but they lifted up three point six percent. Health insurer anib bounce back after being smashed yesterday, and mining services company Parenti that was up as well. Jewelry brand Levisa it got crunched after posting strong increases in both revenue, earnings and profit, but the market was clearly.
Expecting a lot more.
It was off by just under thirteen percent, buying our pay later company Zip plunged despite a sharp lift in transaction value. Intellectual property company IPH Fundmt of Magellan, and Bendigo Bank all dropped as well, and supermarket sales at Cole's jumped four point three percent in the financial year, while our co wholesales creeped ahead just half a percent. The company said in the fourth quarter, inflation moderated to one and a half percent. That's down from six point seven percent in FI twenty three. Prices are still increasing though for cheese, eggs, bananas, and tomatoes, but on the flip side, meat and bakery prices are starting to fall now. The retailer increased that's underlying profit more than four percent, and the total dividend this year is sixty eight cents a share. Coal shares raced out of the blocks this morning. Company finished the day up just under two percent. That's the highest price in about two years. And Ross, that's markets.
Yeah, thanks Ed in partnership with Comsek.
Well, look, let's go from Coals to Woolworks, which reports it's full year profit tomorrow. Let's bring in Laura Bezarati from Comsek. Laura, Look, Coals look pretty good today, so what's the market expecting of Wollwaves.
Good afternoon, Ross. It's quite an interesting time to get these results. Is in it with the cost of living pressures certainly at play, so it's interesting to see how these different retailers are reacting. We know that consumers are being more frugal, they're switching to cheaper options. We ready know people are eating outlets, so that certainly could help their supermarket.
Sales as people opt to cook their meals.
Woolies is expected to see supermarket sales growing by roughly three percent.
That would align with what we saw out of Coals results today.
They were up around four percent in terms of their supermarket sales, so it is likely to see a similar result from Woolies tomorrow. But one thing that could dampen their results potentially is a pullback in spending from big w as customers pullback on discretionary spending.
It's going to be fascinating to see that.
We'll speak with Leah Wikert very very shortly, the chief executive at Coals, But Fordskeu also reports tomorrow.
We heard from BHP, the big iron ore minor. So what's expected with Fordesk.
Look, there's a few things that investors are going to focus on. The first thing, of course, is going to be iron ore prices. We already know that they've been under pressure recently with a sluggish Chinese economy, so that's going to be no surprise. Perhaps a weaker outlook for price as well. There We already saw this with Rio's result just a few weeks back. Now, revenue is expected to come in at eighteen point three billion, sixteen and a half billion of that is expected to come from their iron ore sales.
The other thing will be capital expenditure, which is expected to step up in f y twenty five. And the last thing will of course be their dividend.
Russ I'll tell you.
What great stuff, Laura Beserati, many thanks for your time today. Well, tomorrow the latest monthly inflation number comes out and the Rutter's Survey of Economists suggests the annual rate will fall from three point eight to three point four percent. That ends the argument that inflation will eventually drift down to the RBA's preferred ban.
Between two and three percent.
For this week, former government minister Craig Emerson suggested the monthly inflation series should be abandoned because of its lack of reliability. He also hit out economists calling for rate rises and noted that RBA Deputy Governor Andrew Houses comments that none can be too sure where the economy will land. Well, he says that has merit. One who's been consistently calling for rate rise is Warren Hogan, advisor to Judo Bank, who joins me, Now, Warren, many thanks for your time. As always, this inflation number tomorrow does it really make much bearing on where are the inflation's going or the view of the Reserve Bank goes.
To look gross, It's going to be a very complex number because firstly, of course, we do understand that these monthly numbers are a partial read, they're not the full CPI, and we did get a bit of a bum steer, you might say, from the April and May numbers for the Q two result. But then we're also seeing the first impacts of these extra subsidies the cost of living measures, and it's not just the energy the rent, but it's also stuff that's happening in the states like Queensland have got a number of prominent subsidies. So how the ABS treats that, It's all very going to be complex because the headline number for inflation, which some people will want to focus on, but that's not going to be a good indicator of what inflation is doing because it is being distorted by these subsidies. So it's going to be very interesting, But I'm not sure to move the dial on the conversation around where the interest rates are going.
What do you make also of labor politicians? Number of them spoke about Craig Emerson, but they've been before then, Bill Shorten, a number of others really talking down people who are suggesting that interest rates should rise to quell inflation, suggesting that really if they want.
That, Australia will fall into recession. What's your answer to that.
Well, first of all, as a professional economist as opposed to a politician and someone who's been doing it for thirty years, I would say Australia's best chance of going into a bad recession at some stage in the next few years is letting inflation get entrenched at some stage, accelerating in the future, and us having to raise rates a lot from here, just like the late eighties. So look, I think if the RBA need to adjust one or two more times upwards, then I don't think we're going into recession. I think that's all part of this narrow path and will a soft landing. So look, we don't know the future, and we all have a range of different scenarios we're looking at for the future, but it doesn't mean we don't try and understand what pathway we're on. And at the moment, as the RBA governor is saying relentlessly, inflation's too high and it's not at all clear that it's coming down to target on a sustainable basis.
Okay, so very quickly, are you sticking with your forecast? You still think that interest rates may well go up from here?
Look I am, and the reason is I want to see what happens in the economy in the next two months in response to the tax cuts and of course these cost of living subsidies, because it's a cash injection, it's a fiscal stimulus, and of course we need to see how this economy responds. So look, if I get the information it says we're on the right path, I'll pull those numbers, those forecasts. Yep, but I still think there's a chance.
All right, Warren Hogan.
Always good to having the program at many times for your time, Thanks us well. Coming up, Cole's boss Leah Weckert on the supermarket giants profit result, why we're eating at home more but drinking less, plus her take on the new government laws around dealing with supplies.
That's coming up.
It's great to have your company here on Business Now. Well Ed Boyd earlier went through Coal's results, which reported a one point one billion dollar profit for the past year, with stronger supermarket sales but subdued liquor sales over the past year, and it seems this is part of a new consumer behavioral trend has cost pressures by Australian families. Leah Weckert is the chief executive of Coals and joins me now from its headquarters in Melbourne. Lea many thanks for your time. I just want to go to that because you'd plot this mel carefully anybody. How do you see the consumer changing their behavior as a result of the higher cost of living?
Thanks, Ris, Yes, well, we definitely are seeing cost of living as a significant point of concern for a lot of households across Australia, and we are seeing them change their behavior in terms of how they're shopping groceries. So we are seeing our customers really focused on shopping the specials. They're doing a lot more research in terms of what products and prices they will buy ahead of time, and in terms of the behavior in terms of what they buy. We are seeing customers buy into more affordable products, so that might mean an own brand product versus a proprietary product. We're seeing cheaper cuts of meat going to the basket on a more regular basis, a lot more.
Frozen products, bulk products.
We're also seeing customers really cut back on their liquor consumption as well to help the balance the budget.
Okay, so then if the family is shopping cheaper or try to look for value, you also as a supermarket have to buy more cheaply. So does that put pressure on your relationship with your suppliers who also have inflationary problems? And especially given the new mandatory code of conduct under which the supermarket's now set.
Well, definitely it's in the interest of both supermarkets and suppliers to be having an offer that's really compelling to customers, because we both want a situation where we're driving volumes and seeing.
Increases in sales.
We're certainly seeing many of our supplies very focused on this at the moment, and so in terms of the investments that they are making into things like promotions, that has a lot of focus from the supplier side at the moment, and we wouldn't expect that to change over the next few months as we continue to see this consumer behavior play out.
Okay, so for you, it's all about margin though, trying to get margin on products that you sell. So you've spent a lot of money on customer fulfillment centers in Melbourne and Sydney to allow automated delivery of goods to people, now next day delivery, all.
That type of thing.
These are going to come on stream over the next twelve months or so. Just explain how you think that will change behavior but also your margins as well.
Thanks for us, Well, we are very excited that we are opening to customer for film and centers one in Melbourne and one in Sydney, there's a lot of benefits that they will bring to customers that they can't get today in our stores when they order online with us, for example, we'll be able to over time have a more extended range. So whereas in a supermarket today you might have around twenty thousand products, over time we will be able to build those fulfillment centers to have over forty thousand products. We also can improve the freshness and give customers more visibility of the expiring dates on products that they're getting delivered to them, and it also improves the service metrics, so when you order one hundred products, you're more likely to get one hundred products and what we're able to achieve out of fulfilling the order in store. So there's actually a lot for customers to be really excited about of the opening of these facilities.
So when it comes down to margin, I do note that even your own inflation rates inside the business this year that they were lower than the actual sales growth you're achieving, So that shows that really you've actually got the inflation inside the goods being sold inside coals between two and three percent, which is where the Reserve Bank wants it of course.
Yeah, so pleasingly for customers. Inflation in our business is definitely coming down. In quarter three we had inflation at two point two percent for supermarkets and in quarter four we've reported today that that reduced to one point five percent, so it's definitely making a significant impact.
In terms of the grocery basket.
There are some areas that are actually in deflation as well, so areas like meat with lamb and mintce and the like, they are actually cheaper than they were last year.
So tell me, do you feel the hot breath of competitors every single day you turn up to do this job, Leah, in terms of having to really genuinely look at those competitors, try and price yourself to build that market share, which Coals has been successful in doing over the past few years.
Well, we would not be able to attract customers to come and shop with us unless we had really sharp offers at the moment from a pricing perspective, So we are very live to.
What our competitors are doing.
And I think we would say that over the course of the last couple of years, the competitive intensity in the grocery market has increased. We are certainly keeping a very close eye on that and how our proposition stacks up. And certainly the sales increase that you have seen in our results today is because that value proposition is resonating with customers.
And just a final one for you.
Government clearly focused on the supermarkets and its own inquiry, the new mandatory code all comes in. But the reality is, was that actually supermarkets where people should have been looking for in terms of their cost of living or maybe should have Do you think they've been focusing maybe on other government services instead or as well as where do you think really the focus should have been.
Well, I think inflation is definitely the enemy of bringing the prices of grocery down. We look at our profit margins over the last five years, they've made relatively flat. So this year our profit margin was two point six percent, the same as it was last year, and that has actually declined slightly.
From the year before.
So that would indicate that actually we've been absorbing some of the costs that we've been seeing come through because of the inflationary environment and things like fuel and rent and energy costs. You know, they all impact the costs of the manufacture of goods that we then buy into our business and sell on to customers. And so it certainly is something that I think from our consumer's perspective, getting that inflation in the broader economy down will actually translate to a much more stable grocery price environment.
Lea Worker, Chief executive of Coals.
Always great to chat to you and many thanks for your time today.
Thanks for us appreciate it.
Well.
Just to finish up the program today, the chief executive of the Russian social media site Telegram, Pavel Durov, was arrested on weekend, as many of you might know, at an airport north of Paris, who was detained on grounds that he cite incited offenses including fraud, drug trafficking, cyberbullying, organized crime, plus also importantly the promotion of terrorism and child sexual abuse material. The allegation is that Durov specifically prevented none of this from happening will elon Muskers Russia. Durov's defense posting a hashtag free paddle on his ex social media platform, Telegram is based in Dubai, but famously built up a following in Russia and Ukraine, allowing the exchange of encrypted messages to give quite graphic detail about the war in Ukraine. Ironically, this often includes detail from Russian microblogging sites.
That can be critical of the Kremlin or even Vladimir Putin himself.
Now on twenty eighteen, Russia sought to ban domestic access to Telegram, but rescinded that ban. In twenty twenty, state In the company proved its willingness to cooperate on measures combating terrorism and extremeism. But more than anything, cyber criminals have used it to distribute malware and to host command and control infrastructure, and the French Lord Jirov can be held for a maximum ninety six hours, so do expect more detail in the next day or so. Anyway, that is it for today's program. Thanks for your company. We'll see you tomorrow.