8 Feb 2010

Companies expected to announce flat sales

11:00 am on 8 February 2010

The half-year reporting season gets underway this week, and analysts are expecting companies to announce flat sales but slightly improved profits.

Steel and Tube, and Tenon, kick off the earnings season when they release their half-year books on Thursday.

Head of research at Forsyth Barr, Rob Mercer, says if people are looking for very positive news from the results, they'll be disappointed, as for most companies it is still a tough trading environment.

Mr Mercer says in the six month period to the end of December there will be a number of companies with double digit profit growth, but the majority will be companies which are comparing the profit to a much weaker prior period.

Mr Mercer expects a flat median sales growth with the median profit up 1% for the 44 companies covered.

He says profit growth has been achieved by cutting costs, rather than being driven by revenue growth.

Mr Mercer says the key change in the last six to nine months is that corporate balance sheets have strengthened through strategies like issuing corporate bonds, or equity placements.